RAY SUAREZ: Welcome to “Need to Know.” Thanks for joining us. This week, we devote our entire broadcast to one of the greatest challenges facing the nation – keeping Medicare intact. Few policy questions being debated in Washington matter more on Main Street.
That’s because some 50 million elderly and disabled Americans already get their medical insurance through the program. And because of the aging of the baby boom generation, that number is expected to soar to 81 million by 2030.
The challenge, of course, is how to pay for the program when so many more Americans will rely on it. Before we hear from the group of experts we’ve assembled this week, some basic facts about Medicare. The program began, nearly 50 years ago in 1965 under then-president Lyndon Baines Johnson.
PRESIDENT JOHNSON: No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents.
RAY SUAREZ: Medicare has worked much the way LBJ hoped, helping to sharply reduce poverty among the elderly. Take a look at these U.S. census figures. In 1959, before Medicare existed, the poverty rate among the elderly was more than 35 percent. By 1975, partially because of the program, it had declined to about 15 percent. And the latest figures put the elderly poverty rate at below 9 percent. That progress helps explain why there is such a fierce debate about how to save the Medicare program. For more about all of this, I am joined by Judy Stein. She is the founder and executive director of the Center for Medicare Advocacy. And has been advocating on behalf of the elderly for over thirty five years.
Paul Van de Water is a senior fellow at the Center on Budget and Policy Priorities. He served as Assistant Deputy Commissioner for Policy at the Social Security Administration and worked for 18 years at the non-partisan Congressional Budget Office. And Peter Suderman is a senior editor at Reason, a libertarian magazine. He regularly writes about healthcare and the federal budget.
RAY SUAREZ: Well, the cost of Medicare, panel, was $556 billion last year. By 2022, it’s expected to be more than $1 trillion. Another way of talking about higher costs is expressing it as a percentage of the economy that the government spends to maintain Medicare. It was a little more than 2% in 2001. Today, it’s more than 3.5%. And by 2050, it’s supposed to be 8% of all federal expenditures. And, I guess, that’s the crux of the problem, isn’t it?
JUDY STEIN: The American population is not only aging. But we are living longer. That’s the good news. And there is– no free lunch. And there’s no free longer life. And we have to figure out what we’re going to do, honestly, about the fact that we’re living longer. We have more chronic conditions. And we actually can stay well if we allow Medicare and our health insurance programs to provide proper care for people. And try and marshal the overall health care costs without blaming the program which, as you indicated, has helped drive down the poverty of older people and people with disabilities. S– bring economic security to their families and helped increase the lifespan of our American population.
RAY SUAREZ: Raising the Medicare eligibility age from 65 to 67 would save the federal government, by some estimates, $148 billion through 2022. Paul, that’s just the kind of question you’ve studied throughout your career, when you change a requirement like that, what the overall effect on the cost is. Is it part of the answer?
PAUL VAN DE WATER: No, it’s not part of the answer. Not only would raising the age of eligibility for Medicare shift costs from the federal government to states, to individuals, but it would also actually increase total health care spending. The Kaiser Family Foundation– did a thorough analysis of this proposal– not too long ago. And it showed that the total increase in health care costs to the health care system overall from raising the Medicare eligibility age would be twice the savings to the federal government. And that’s because Medicare is a relatively efficient program– compared to other sources of insurance.
RAY SUAREZ: So by opening the door later, which would mean millions of people with two fewer years of Medicare eligibility, we actually wouldn’t save any money, Peter?
PETER SUDERMAN: Well, we’d save a little bit. I think that raising the eligibility age is– can be part of the solution. But it’s not the solution. We’d need to do a lot more than just raise the eligibility age. One thing to remember with raising the eligibility age now is that under the Affordable Care Act, people who are under 90% of the poverty line would probably be eligible for health insurance subsidies in the exchanges created by the President’s health care law.
RAY SUAREZ: So we’d get them covered in other ways?
PETER SUDERMAN: So they wouldn’t have–
JUDY STEIN: Some of–
PETER SUDERMAN: –no options for coverage.
RAY SUAREZ: So it would hurt some people much more than others, Judy?
JUDY STEIN: Absolutely. There would be many uninsured. And employers and states would have to either pick them up, or we’d have to address that in the Affordable Care Act, which I don’t know if anybody really wants to open up and debate. And something’s gonna have to be done to either insure those two years of older people or leave them uninsured.
RAY SUAREZ: It– it would seem that there’s got to be some way to take account of the differences that people arrive at that part of their life in, the different conditions. Top earners who are already living longer saw their life expectancy increase by five years over the last four decades while lower earners saw that increase of only a year. We have a two-tier result out there in the population. Can we have a two-tier Medicare system?
PAUL VAN DE WATER: Well, that’s exactly one of the arguments, for example, for raising the income-tested premiums. It’s also important to remember that higher income Americans already pay through other routes substantially more for their Medicare coverage than typical people. First of all, higher earners– people pay Medicare tax on their entire earnings. So someone who has $1 million in earnings pays ten times as much as a person who has $100,000 in earnings, who in turn pays twice as much as a $50,000 earner. In addition, we’ve put in– new Medicare taxes that are paid only by people with incomes over $200,000 or $250,000. So we’re already– have put in place mechanisms through which higher income people have to pay more for their Medicare.
PETER SUDERMAN: Ultimately there are limited dollars that we can spend on a program like Medicare. But right now, that probably is that in the long term, again, 20, 30, 40 years out, the cost of Medicare is set to keep rising and keep rising and keep rising. And it’s gonna keep rising– faster than we have the ability to pay for it. And that’s the really big problem. So how do we keep the long-term cost of Medicare– how do we restrain that growth, bend that curve down so that it looks more like– our– our relatively smaller ability to keep paying for the program?
RAY SUAREZ: One way would be to keep people working longer– because they’d be more likely to get their insurance not through Medicare but through employer-based plans, which is where a majority of Americans get their plans right now. But a lot of people– some– many people can do that. But a lot of people are limping into those years, just making it or going without insurance until that first day of Medicare eligibility. Can we design a program that responds to the very different needs among very different groups of Americans?
JUDY STEIN: Well, I mean, one of the problems with having people continue to be employed is that we also need jobs for younger Americans. And I think one of the things we shouldn’t do is create a generations gap here– a battle between the generations any more than between the rich and poor. And one of the things I’m noticing is how many young people, people who– need jobs are getting jobs without employer benefits. By that, I mean, that they’re not paying into the system the way many of us did with long-term employee jobs where we had benefits and pay Medicare tax and we pay Social Security tax. So I do think that that’s a dilemma.
RAY SUAREZ: Talking briefly about how difficult it is to project costs and revenues in the out years. If we had asked people 10, 11, 12 years ago about what the year 2013 was going to bring, they wouldn’t have given us the menu of terrible options that we’re facing today. Fewer people are working. Fewer people are paying as much tax as we had projected was going to be paid into Medicare for 2012, 2013, 2014. A lot more people have taken early retirement because of– long-term unempl– unemployment and under-employment. Is our problem, our Medicare problem, being made worse, in the near term, by an unhealthy economy and– certainly an unhealthy job market?
PETER SUDERMAN: Certainly the current economy doesn’t make things easier for Medicare or for the federal budget. But I think the long-term thing that you can always presume about Medicare is that it’s gonna cost more than you think it’s going to. Four years after Medicare was passed, it was about 400% over the initial projections at the high end. Throughout the 1970′s, hospital inflation continued in the range of 15%. We started to reform the way we pay for the program in the early 1980′s. And that helped control hospital costs. But it didn’t control physician costs. So then we started to reform physician costs. Well, that didn’t work so well overall. Because what we ended up seeing was that no matter what we did, we could control costs in a narrow area by changing the way we pay p– for providers, by rearranging some of the administrative do-dads. But what we ended up seeing was that costs went up and up and up, no matter what we did. And so we’ve gotta try something different.
RAY SUAREZ: Paul, taking into account what Peter and Judy just said, would a healthier economy and certainly– a healthier jobs picture make some of the choices we have to make in the near term less drastic?
PAUL VAN DE WATER: It would help in the near term. But Peter is right, that the– the real issue is the– is the longer run. That’s what we need to focus on. I’d– would disagree with Peter though about the success of Medicare’s payment reforms in the past. Medicare’s record has actually been very good. Over its lifetime– Medicare has held down– growth of health care costs much better than private insurance. Medicare has been in the forefront of introducing new ways of paying both hospitals and doctors. Those– procedures have been adopted by private plans. And that’s one of the reasons why Medicare has been a leader in– health care payment policy. And w– with other, additional reforms that have been put in place by the Affordable Care Act, I think– Medicare is gonna continue to be the leader in payment reforms over the next– decade or so.
RAY SUAREZ: From 1970 to 2010, 40 years, the medical inflation for people out in the private world, getting their own insurance, has been much higher than it has been for people who are in Medicare. So they’re al– they’re already controlling costs, aren’t they?
PETER SUDERMAN: Well, it’s hard to call Medicare efficient when the program wastes about 10% of its m– of the money that it spends each year. That’s according to the Government Accountability Office, which released a report– not very long ago, that basically that $50 billion within the program each year– is waste or improper payments or fraud or something like that. And it’s really hard to describe a program that spends that much on improper pro– payments and waste as an efficient program.
JUDY STEIN: As an advocate and a bit of a Medicare historian, I would suggest that there are a variety of ways to bring down costs which w– are– perhaps said to be impossible to do. So let me suggest them. One is to drive– bring down the cost of prescription drugs under the Medicare program. Now– realists, so to speak, would tell me that that’s just not doable because there is too many interests in Congress– con– with the pharmaceutical industry. But if we were to keep the costs of Medicare drugs no more than what we pay for Medicaid, which is a w– a program based on income, we could save about $140 billion over the next ten years.
RAY SUAREZ: That would mean rewriting the bill that created Medicare part D, wouldn’t it?
JUDY STEIN: It would. In fact, the current bill took away discounts that people in Medicaid get when they move those people who are eligible for both Medicaid and Medicare to Medicare and prohibits Medicare from negotiating drug prices. It’s quite astounding that the law says the secretary, if you will, shall not negotiate drug prices. We need to do the opposite. We need to require that.
RAY SUAREZ: Peter, one third of all Medicare costs go to patients with a chronic illness who are in the last few years of their lives. If we try to control those costs– would that bring us close to– what Sarah Palin talked about the so-called ‘death panels? Would there be peop– people making decisions about whether to spend money for coverage of chronically ill people?
PETER SUDERMAN: I don’t think that death panels are what we need to worry about. I think that– overspending is what we need to worry about. And I’m a little– skeptical of some of the proposals that we’ve heard here already. In particular, cutting spending on drugs by negotiating drug prices– that would only get us about $140 billion over the next ten years. Now, that’s just not that m– much money.
RAY SUAREZ: That used to–
PETER SUDERMAN: In the context of a–
RAY SUAREZ: –be a lot of money–
JUDY STEIN: Yeah–
PETER SUDERMAN: But in the– in the context–of a program that’s gonna be costing, as you said, a trillion dollars a year. We’re talking about $14 billion a year in savings. And so what we need to be doing is figuring out how to address the real costs, which are in the hospital program, which are in Me– Medicare part A and B and figuring out what can we do to reduce spending in those– in that part of the program and reduce the overall growth of the program.
JUDY STEIN: Medicare has been a life saver for many people who would otherwise not be able to afford insurance. I know of– one individual who I’ve been representing and known since 1987 who has multiple sclerosis. So people with long-term conditions like M.S. are living longer. Now, she’s– she’s at home with home care. There are relatively low– low priced home care services, home health aides and a n– and a nurse once every other week and a physical therapist twice a month. And because of those services, she can remain at home, not in a nursing home. And she says that Medicare has quote– “On more than one occasion saved my life.” Because otherwise, she said, “I would die because I will not go to a nursing home.”
PETER SUDERMAN: What I would say is that it’s very important to remember beneficiaries. But it’s also important to remember doctors. And doctors are increasingly discontent with the way Medicare works and especially with the way that it pays them. And if you look at survey after survey, doctors report being unhappy with Medicare’s bureaucracy, with its paperwork, and with the pay cuts that they see coming down– coming down the road. And a big part of– the way that a lot of people are proposing to control costs in Medicare, the tweaks that we’re talking about, they actually are redu– reducing payments to doctors. And if you reduce payments to doctors too much, you’re gonna end up with not enough doctors to care for the seniors who need this care. This is actually something that the Medicare actuary has projected, is that if we reduce payments too much– if we reduce payments– as called for by the Affordable Care Act, there is a good chance that we will actually see a lot of– physicians– doctors, other ho– medical providers stop practicing.
RAY SUAREZ: Have we– have we seen– ’cause that’s been threatened for a long time. Have we seen doctors actually pull out of the program?
PAUL VAN DE WATER: No, in fact the Medicare Payment Advisory Commission, which is Congress’s nonpartisan advisory body on Medicare payment policy, continues to find that access is very good. Moreover– in contrast to what Peter says, the physicians in general like Medicare because it’s a relatively good payer. It doesn’t hassle them the way private insurance companies do.
JUDY STEIN: Now, I’d add to that– just– a personal story. My– my husband is a family doctor. And– the dinner table is– rife with conversations about bureaucracy. And they’re– they’re much more about– private insurance. There are some doctors not taking new patients. But it’s not an– a major access problem.
RAY SUAREZ: Of course, as always, there’s a political aspect to this, as– you can imagine. 58% of voters oppose cutting Medicare spending, according to a recent poll. And they’re a very potent force in our society. They vote more often than younger people. They call their Congress members more– more often than– than younger people. Can they– by themselves bottle up reform?
PETER SUDERMAN: Well, certainly they are a potent political opposition. But one thing that I think that we all agree here on is that there is no free lunch and that whatever you’re gonna spend on Medicare, you also have to figure out how to pay for.
RAY SUAREZ: Peter– recent exit polls show that after people voted for President and came out the door, they preferred by three to one, President Obama’s approach to providing for the future of Medicare over Vice Presidential Nominee Paul Ryan’s voucher-based plan, where the government would give you a flat rate and then you’d go out into the market and shop. Whether it’s a good idea or not, is it politically dead?
PETER SUDERMAN: Politically– it’s not doing so well right now. That’s for sure. But in the long term, that’s the kind of solution that we’re gonna have to be looking at.
PAUL VAN DE WATER: I don’t think that– that competition, either through purchasing insurance or through– purchasing the health care services directly is gonna be the solution. I think that what we need to focus on is reforming the health care delivery system overall. The–
RAY SUAREZ: But would we– we be better shoppers? Would we be better shoppers if we knew what anything cost? We buy health care in a way that’s different from the way we buy any other thing in life. Food, housing, clothing– automobiles– anything.
PAUL VAN DE WATER: But it’s not simply a question of knowing what health care services cost. More important is knowing what health care services do, what benefits they may provide. And that’s what’s very hard to determine. Moreover, when you go to a doctor because you have a complaint, you’re not buying a particular service. You are starting out on a course of– treatment, a course of service which is unpredictable at the start, both to you and to your physician. So f– in most cases, it’s really not feasible to get a price quote for solving a particular health care problem.
RAY SUAREZ: And I’m not sure people would hire the cheapest heart surgeon anyway.
JUDY STEIN: I know from speaking to seniors at senior centers and to groups of people that we don’t have the resources to help people wisely make those plans. And they often don’t make good choices. The fact is that health insurance is not like buying shoes or a house or something else. And when you’re ill– when you’re faced with an expensive health need– if you– for instance, I’m– I’m a breast cancer survivor. When I found that I was going to have to deal with those kinds of costs, I was very concerned. But I c– really could not focus on what oncologist was gonna cost what. I needed to know which one seemed the best fit and could provide the best treatment for me so that I could keep working, so that I could– you know, what are the other issues? Can your family get you to that particular– hospital or that treatment center? The expensive issues involved in health care are not like purchasing shoes and even housing. But the fact is that we have to recognize what the world and the U.S. was like before Medicare. People were not as well. They didn’t live as long. And families were at greater economic and health risk. And we have to decide whether that’s a time we want to go back to. And if we don’t, then I think we need to deal with some hard political decisions about where some real cost savings can be and not pretend that beneficiaries can be the brunt of how we’re gonna find that.
RAY SUAREZ: Judy Stein, Paul Van de Water, Peter Suderman, thank you all.
JUDY STEIN: Thank you, Ray.
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RAY SUAREZ: That’s it for another edition of Need to Know. On our next broadcast…banned from public school. Is this Mexican-American studies program anti-white?
CURTIS ACOSTA: The kids are coming to our Sunday class because it’s important to them, because it’s a space where they feel that they are valued, that their stories are valued.
TOM HORNE: I was very shocked by what I saw. The materials are extremely racist. People would be very surprised to hear this.
RAY SUAREZ: I’m Ray Suarez. Thanks for watching.