Compromise only option for fixing Medicare - Published in the Centre Daily Times, April 2012

It’s an election year, and that means more grandstanding in Washington – this time about Medicare. Our seniors’ health care is run by the government and broken into parts.  Part A is for hospital stays, Part B covers Doctor visits, and Part D pays for medications. Total premiums for Part B are about $100/month, with Uncle Sam picking up the other $300.  Seniors don’t pay any premiums for Part A, but pay about $30/month for Part D.

Those of you familiar with your current health care costs will see this as a great deal, particularly for older folks who need a lot more care than the rest of us.  That’s the problem, though, the deal is too good, as we’re not paying enough to cover all the costs.  Medicare deficits are driving our country’s finances into the hole in a big way.

Our payroll taxes (1.45% for you, another 1.45% for your employer) cover only about one third of Medicare’s cost. Premiums and copayments paid by our seniors cover another quarter.  The difference, about 40%, our government borrows, increasing our deficit.  This year, that deficit is about 285 billion dollars, and will keep rising as health care costs skyrocket, particularly for those needing expensive end-of-life treatments and care.

There are three main ways to deal with this deficit – (1) limit payments to doctors, hospitals, and pharmacies; (2) limit how much the government pays for the insurance itself; or (3) raise premiums and payroll taxes.  Medicare currently uses option (1), but would have to reduce payments even more radically to balance their books.  Doctors are already turning away Medicare patients because they can get higher payments from younger people.  Further payment reductions would mean fewer doctors available to our seniors, and likely rationing of care.

Republicans are proposing option 2, opening Medicare up to private insurers and setting a cap on the government contribution to the premiums.  The hope is that private insurers would compete with traditional government Medicare (which seniors could still choose), reducing premiums.  This seems overly optimistic though, since a similar plan – the Federal Employees Health Benefits (FEHB) program - has seen its costs rise by a total of 30% over the past 4 years.  The Republican proposal would have capped its premium contribution by only 15% over that time.  Our seniors would need to either eat that difference, or choose a cheaper, weaker health plan.

Option 3 is the simplest, and may make the most sense. Doubling the 1.45% payroll tax would just about cover our current budget overruns.  However, our politicians never have the backbone to tell us that tax increases are necessary, even when they are.

Whether we give our premiums and copays to the government or to a private company, some means of addressing the real problem – holding down the costs of medical care in our country – is necessary.  This means limiting malpractice awards and capping allowable profit margins at insurance agencies, pharmaceutical companies, and hospitals.  Combine that with modest increases to taxes and premiums, along with raising the Medicare eligibility age, and Medicare will be on sound footing again.  Democrats and Republicans have both suggested these ideas in the past.  Now it just takes bargaining and compromise to fix Medicare, something that's been in short supply in Washington lately.

Spend Less and Tax More - Published in the Centre Daily Times, December 2011

In my formative years, I was a regular reader of the comic strip Bloom County, which spawned Opus the Penguin, a hapless microcosm of the American middle class.  In one strip Opus, who is perpetually out of shape and overweight, searches for a quick diet fix.  He’s told the answer is simple – he should eat less and exercise more.  This is precisely the way we need to handle our bloated budget and exploding debt – spend less and tax more.  However, like Opus, our congress is unwilling to accept the obvious.

Our biggest eating problems are our entitlement programs – Social Security (which is somewhat paid for with payroll taxes), Medicare (woefully underpaid for), and Medicaid (not paid for at all).  The Democrats refusal to consider major, or even minor, changes to these programs is unconscionable.  The math cannot be denied – within 30 years, 1 out of 5 of our population will be on Social Security and Medicare rolls, thanks to the wave of aging baby boomers.  The rest of us simply cannot pay for this without massive, unacceptable tax increases.  Reform is a necessity.

However, it is also clear that our government isn’t bringing in enough income.  Here, the Republicans are to blame, with their refusal to consider any adjustments to increase revenue in future budgets.  While we clearly shouldn’t raise taxes until we see improvement in the economy, there are certainly innovative ways to adjust our tax codes to increase revenue in the future. 

If we continue to do nothing, eventually Medicare, Medicaid, and our debt payments will swallow our federal budget entirely, leaving nothing to pay for defense and everything else.  Well not nothing – we could always continue to borrow trillions more, until we fall into an economic death spiral and implode.

Here are two simple messages.  First, to the Republicans:  you cannot eliminate or gut our entitlement programs.  Your older constituents will not stand for that.  Also, please look closely at the budget numbers.  Really look at them.  You’ll see then what economists everywhere see – we are not bringing in enough revenue, nor will we in the foreseeable future.  Tax increases or tax code changes must happen.

To the Democrats:  we cannot afford to sustain Social Security, Medicare, and Medicaid at their current levels, particularly as the baby boomer enrollment explodes.  Your constituents will not allow you to raise taxes to the point where we can afford them.  Please look at the projected budgets and see what everyone can clearly see – entitlement programs will break us if you don’t scale them back.

What has happened to compromise in our country?  No sane business could survive like this.  No American family could either.  There must be give and take for the greater good.  Spend less and tax more.   There are no miracle solutions you can order online (as Opus surely would) that avoid this simple principle.  For once, the politicians should stop their ridiculous posturing, lock themselves in a room, act like the grownups they’re supposed to be, and work together to find a compromise.  The solution won’t please everyone, but no solution is not an option.