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Saving Medicare

The political battle heats up over Medicare’s future

Among other proposed fixes to Medicare financing: adding to the trust fund by a slight increase in the current 1.45 percent payroll tax; raising the age of eligibility above 65; cutting payments to health care providers; and allowing Medicare to directly negotiate lower prices for prescription drugs.

"These are all politically unattractive," Rother says, especially as the Republican leadership has drawn the line at any tax increase, including eliminating the Bush tax cuts for the highest income groups. "But," Rother adds, "something does need to be done."

What of Ryan's contention that nothing in his plan would change Medicare for people now over age 55? Not wholly true, experts say.

Medicare and the larger health care system

More sweepingly, Rivlin and other analysts believe Medicare should be viewed as part of a flawed health care system that needs to run more efficiently as a whole. Robert Reischauer, president of the Urban Institute and a former director of the Congressional Budget Office, says to make Medicare more efficient "you have to change the system that provides health care for all of us. And that can't be done simply by changes within Medicare."

Central to that idea is altering its payment system by rewarding doctors and other providers for the quality of care they give instead of, as now, for the number of procedures they perform. This change — proposed for years by the Medicare Payment Advisory Commission, which advises Congress on Medicare financing — was written into the new health care law.

The new law also sets up an Independent Payment Advisory Board with the power to assess medical treatments and change reimbursements to health care providers to keep costs down. Republicans view the board as a means of rationing health care and often represent it as the Democrats' only "solution" for curbing costs, although the law specifically prohibits rationing.

The law aims to slow the growth of Medicare costs by giving health care providers smaller annual payment increases, a measure estimated to save $500 billion over 10 years without cutting benefits. If that happens — and Congress does not back down in the face of intense lobbying from providers — the Medicare trustees and Medicare's chief actuary, Richard Foster, predict a rosier future for the program's long-term solvency. They also say Medicare will consume far less of the nation's income than it would otherwise.

The new law "makes some very significant [cost] reductions in the program, and the [current] debate seems to totally ignore that fact," says Reischauer. Similarly, he says, the Ryan plan includes "many of those things that the Republicans argued against in the Affordable Care Act," such as health insurance exchanges.

What of Ryan's contention that nothing in his plan would change Medicare for people now over age 55? Not wholly true, experts say. In repealing the health care law, his plan would eliminate popular new Medicare benefits such as free health screenings and would no longer close the gap in prescription drug coverage known as the doughnut hole. And over time, beneficiaries in traditional Medicare would see their premiums rise as fewer people remain in that risk pool to share the costs of the program.

Next: 50 years of fighting about Medicare. >>

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