Medicare Faces a Crisis Without Congressional Action

Op-Ed by Secretary Leavitt as appeared in the Buffalo News on August 2, 2008 

Medicare has done a great deal of good since its enactment 43 years ago. But bipartisan action is needed if we are to keep our commitment to seniors without breaking the bank or the financial backs of American workers.

For the second year in a row, Medicare spending has triggered a statutory alarm requiring Congress to act to keep the program solvent. Yet some members of Congress still refuse to face the facts about the trouble we are facing.

Three things are combining to create a "perfect storm" of financial liability headed right for our children and grandchildren: rising health-care costs per beneficiary, many more beneficiaries, and fewer workers per beneficiary.

In 1970, the average cost per Medicare beneficiary was under $2,000 in today's dollars. Now it's over $10,000. Meanwhile, the number of Medicare beneficiaries has doubled. You can see why the overall cost of Medicare has risen from about $40 billion in 1970 to $467 billion today.

The problem only gets worse as baby boomers retire. Household health care spending nearly will double in the next 20 years from 23 percent of total compensation to 41 percent. In the same 20 years, Medicare's share of federal spending also nearly will double, from 13 percent to more than 23 percent.

Now comes the final component of the storm. In 1970, there were more than four workers for each Medicare beneficiary. Now there are slightly under four. In 20 years, there will be just two and a half.

So what can we do? First, we must reward physicians for providing high-quality care, instead of just paying them for more care.

Second, we need to make Medicare Parts A and B operate more like the Medicare Part D prescription drug benefit. Part D uses competition, quality- and cost-transparency, and consumer choice to keep costs almost 40 percent below original estimates for the benefit.

Third, every generation needs to do its share. My 30-year-old son and his wife are struggling to buy a home and raise a family, but he's also paying taxes to subsidize my parents' Medicare coverage. On the other hand, my parents have paid into the system, and have a reasonable expectation that the government is morally obligated to fulfill.

Both generations could make good arguments on their own behalf. The problem is, both would be right. But what's not right is to push these difficulties off onto future generations.

In February, the president sent Congress legislation that addresses a few of Medicare's ills. Congress ig nored it and last month voted to ignore the very law that requires it to address Medicare solvency. This can't go on. In just 10 years, the Medicare Hospital Insurance Trust Fund will become insolvent.

There are three ways to approach change. You can fight it and fail; you can accept it and survive; or you can lead it and prosper. We are the United States of America; let us lead.

Mike Leavitt is secretary of the Department of Health and Human Services.