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Entitlement program faces cuts

Talk about balancing the budget usually includes Medicare in the equation.

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By Jack Torry and Ben Sutherly, Staff Writers Updated 9:38 AM Monday, November 14, 2011

WASHINGTON — A bipartisan congressional committee seeking to cut the federal deficit by hundreds of billions of dollars during the next decade could take a whack at Medicare, whose costs are expected to reach nearly $1 trillion annually by 2021.

When Congress talks about balancing the federal budget, most equations include Medicare, the Great Society program that pays most of the health costs for nearly two million seniors in Ohio.

But if lawmakers cut Medicare payments to physicians and hospitals, they will affect Reiling and physicians like him across the country.

“This can determine access to care and the viability of our practice of medicine,” said Dr. Evangeline Andarsio, whose patients at her Dayton obstetrics and gynecology practice are about 10 percent Medicare.

An Ohio State Medical Association survey last year found 44 percent of its doctors have declined, will decline, or will consider declining new Medicare patients due to ongoing problems with Medicare reimbursement.

The so-called “supercommittee” panel, which includes Sen. Rob Portman, R-Ohio, is trying to scrape together a compromise.

The committee’s deadline to find a way to reduce the federal deficit by as much as $1.5 trillion during the next decade is. Nov. 23.

Should the panel fail to produce an agreement, the law will require $1.2 trillion in spending cuts during the next decade. The law would exempt Social Security and Medicaid from reductions, but Medicare providers could face payment reductions of as much as 2 percent.

Bigger cuts — up to 27.4 percent — are currently scheduled to take effect in January, though many political observers think Congress will postpone them at the last minute, as has happened in the past.

Few things in American politics are more politically perilous than tinkering with federal entitlement programs of Medicare, Social Security and Medicaid, which account for half the federal budget.

More than 47 million Americans are enrolled in Medicare, a number expected to climb to 64 million by 2021. For those 65 and older, Medicare covers most of the costs of hospitalization, physicians and prescription drugs.

By any standard, Medicare is a good deal for Americans. Before President Lyndon B. Johnson pushed Medicare through Congress in 1965, only half of all seniors had health insurance.

But the price tag has been staggering as costs have risen much faster than early projections. In 1967, the House Ways and Means Committee estimated that Medicare would cost $12 billion in 1990 but the actual cost of the program that year was nearly $100 billion.

A study by the Urban Institute shows that a married couple earning a combined $87,000 a year and planning to retire this year will have paid $119,000 during their lifetime in Medicare taxes. But they would receive an estimated $357,000 in Medicare benefits during their retirement.

The result of this widespread discrepancy is that by 2024, the Medicare hospitalization fund will be exhausted, according to the latest annual report by the Medicare Board of Trustees.

Unlike discretionary programs, such as defense, foreign assistance, housing, criminal justice and the environment — which must be approved every year by Congress — entitlements are essentially on autopilot. Unless Congress steps in to halt annual increases, entitlements grow every year as the population ages or health costs increase.

“The problem with Medicare is it’s already a large program and projected to grow faster than the economy,” said Robert Bixby, executive director of the Concord Coalition, a Washington organization that lobbies for balanced budgets. “So the savings need to be aggressive in that area.’’

Bixby said cutting waste, fraud and abuse or highway programs won’t get to the level needed to make a dent in the deficit.

“It’s the aging of the population and the rising health care costs — that dynamic is what’s driving the budget deficit,” he said.

As baby boomers flood the retirement rolls, researchers develop newer drugs, and physicians turn to more sophisticated surgeries, the price of health care continues to climb, dragging Medicare and Medicaid costs with it.

In a speech last April, President Barack Obama warned that, without changes, by 2025 the taxes collected by the federal government will pay for only Medicare, Medicaid, Social Security and interest on the national debt.

“Every other national priority — education, transportation, even our national security — will have to be paid for with borrowed money,’’ Obama said.

Painful options

The deep divisions that keep Congress from balancing the budget are visible also on the smaller supercommittee. Republicans such as Portman are resolutely opposed to raising income tax rates, while Democrats oppose major revisions in Medicare, Medicaid and Social Security.

There are a number of ways to reduce Medicare spending, although none is popular with a majority of the elderly, a sizable and influential voting bloc.

Lawmakers can cut payments to physicians, but that could prompt doctors to drop patients.

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