- [The CBO] continues to project explosive Medicare spending growth over the next 75 years
- Meeting Medicare’s budgetary challenge would become even more difficult under a new Senate bill, S. 2491, the Medicare Protection Act, introduced on June 18 by Sen. Mark Pryor
- One provision would express that the Medicare eligibility age should not be increased and that the program should not be privatized or turned into a voucher system
- The bill’s other major provision would move beyond symbolism by restricting the procedures that Congress can use to adopt reforms
Medicare, the federal government’s second largest entitlement program, is slated to grow much faster than the economy in upcoming decades. The sooner we address the pressing budgetary challenge posed by the program’s unsustainable growth, the better. Unfortunately, a new Senate bill would put up roadblocks on the path to reform by ruling out potential Medicare solutions.
Although the Congressional Budget Office’s new long-run budget outlook is slightly less dire than last year’s outlook, the agency continues to project explosive Medicare spending growth over the next 75 years. Under CBO’s extended alternative fiscal scenario, which reflects realistic assumptions about payments to health care providers, spending will rise from 3.0 percent of GDP in 2014 to 4.7 percent in 2039, 6.8 percent in 2064, and 9.4 percent in 2089. Spending on hospital benefits will far outstrip earmarked payroll tax revenue and spending on outpatient and prescription drug benefits, which are paid from the general treasury, will put severe stress on the overall federal budget.
Meeting Medicare’s budgetary challenge would become even more difficult under a new Senate bill, S. 2491, the Medicare Protection Act, introduced on June 18 by Sen. Mark Pryor, D-Ark., and co-sponsored by 20 other Democrats. Rather than finding solutions, the bill would take potential solutions off the table.
One provision would express the sense of the Senate that the Medicare eligibility age, currently 65, should not be increased and that the program should not be privatized or turned into a voucher system. Although this nonbinding provision would not actually restrict Congress’s power to adopt future legislation, it would draw a symbolic line in the sand against two potential reform strategies.
Since Medicare was created, life expectancy at birth has risen by more than seven years for women and almost 10 years for men, with further increases expected. In the face of these trends, it’s unreasonable to insist that no increase in the Medicare eligibility age ever be considered, particularly when Social Security’s normal retirement age is rising from 65 to 67 under a bipartisan reform plan adopted in 1983. And, in view of the rapid spending growth that Medicare is experiencing under its current structure, it’s irresponsible to summarily reject every potential reform that critics may label as a voucher system.
The bill’s other major provision would move beyond symbolism by restricting the procedures that Congress can use to adopt reforms. The Budget Act of 1974 created a special filibuster-proof process called budget reconciliation, in which bills can be passed with a simple majority of 51 votes, rather than the 60 votes normally needed to ward off potential filibusters. In those years in which Congress gets around to adopting a budget resolution, reconciliation is used to adopt any tax and entitlement changes, except those affecting Social Security, called for in the resolution. S. 2491 would amend the Budget Act to bar the use of reconciliation to pass any reforms that restrict Medicare eligibility or eliminate or reduce Medicare benefits. The restriction would apply to all potential benefit cuts, not just the eligibility-age and voucher reforms targeted by the bill’s first provision.
Budget rules should help Congress make politically difficult choices that address long-run problems and avoid politically expedient decisions that aggravate long-run challenges. Rewriting the rules to discourage Congress from considering Medicare benefit cuts would turn that logic on its head. Benefit cuts are never a politically expedient decision – as I explained in 2012, Democrats and Republicans regularly attack each other for allegedly trying to cut Medicare.
Indeed, the introduction of S. 2491 is itself intended to score political points by capitalizing on the unpopularity of benefit cuts. It’s no coincidence that Pryor is in a tight race for re-election and that 10 of his 20 co-sponsors are also facing the voters in November. And, it’s revealing that Pryor has accused his Republican challenger of supporting Medicare cuts, who has responded by claiming that Pryor voted for Medicare cuts as part of health care reform.
Unlike the current rule barring Social Security changes from being made through reconciliation, which applies impartially to tax and benefit changes, S. 2491 would restrict only benefit cuts. Reconciliation procedures would remain available for other Medicare changes, most of which are politically easier and therefore have less need for procedural protections. Medicare tax increases, like those adopted in 1990, 1993 and 2010, could still be done through reconciliation, as could cutbacks in payments to health care providers, a strategy that appeals to both parties but rarely yields lasting cost reductions.
A variety of difficult measures, including both benefit cuts and tax increases, will ultimately be needed to address Medicare’s fiscal challenge. We may not yet be ready to solve this daunting budgetary problem. But we certainly can’t afford to start taking potential solutions off the table.
Alan D. Viard is a resident scholar at the American Enterprise Institute.