Medicare Key To Conquering Deficit Dilemma There are really only two ways to make Medicare cost less: Pay health care providers like doctors and hospitals less, or make Medicare patients pay more. Until now, neither has been very popular politically.

Medicare Key To Conquering Deficit Dilemma

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In the coming months, you can expect politicians to highlight many government programs they consider wasteful or just plain wrong. Many of those programs will have one thing in common: They're actually a tiny part of the federal budget. A few things do cost a lot, and their cost is growing over time. One of the biggest is Medicare, which takes up 12 percent of the federal budget all by itself.

NPR's Julie Rovner reports.

JULIE ROVNER: At a cost of roughly $500 billion a year, Medicare - as the saying goes - already represents real money, even by Washington's standards.

Douglas Holtz-Eakin is the former head of the Congressional Budget Office, and now runs a Republican think tank.

Dr. DOUGLAS HOLTZ-EAKIN (President, American Action Forum/Former Director, Congressional Budget Office): If you look past the next eight to 10 years, Medicare is the deficit problem. And there's simply no way we can address our fiscal problems without coming to terms with Medicare's future.

ROVNER: A future that includes 78 million baby boomers, the first of whom are just now getting their Medicare cards.

Health policy analyst Jeff Goldsmith, who's studied the boomer generation, says that's been largely overlooked in the debate over the new health law.

Mr. JEFF GOLDSMITH (Health policy analyst): In the first 10 years of health reform being implemented, you know, you'll see 30-some-odd million baby boomers become eligible for, and enroll, in Medicare.

ROVNER: That's an increase in Medicare's population of about 30 percent. Now unless you change who's eligible for the program - something no one seems to be suggesting - there are really only two ways to make Medicare cost less. You can pay health-care providers - like doctors and hospitals - less, or you can make Medicare patients pay more. Until now, says Holtz-Eakin, neither has been very popular, politically.

Mr. HOLTZ-EAKIN: Conventional politics are - providers say no, no, no, I can't live with less. Citizens say no, no no, I can't pay more. But the ultimate irony here is that conventional politics have to change, because the numbers don't add up. Either we proactively take this on as a nation, or international lenders are going to say forget it, drop dead and we'll have an enormous economic crisis.

ROVNER: Jeff Goldsmith says there's one, small ray of hope: The generation coming onto Medicare isn't quite as attached to it as the current one.

Mr. GOLDSMITH: I think the baby boomers do not have the same type of emotional -almost galvanic skin response to Medicare politics that their parents did, because I don't think the typical baby boomer has thought for more than five minutes about the effect of Medicare on their lives - because they're not old, and Medicare is perceived as something for old people.

ROVNER: Still, it may be hard to load much more cost onto patients. Over the past decade, Medicare recipients have already been asked to spend more of their own money out of pocket on health care - 16 percent of their income, up from 12 percent. Bruce Vladeck ran Medicare during the Clinton administration.

Mr. BRUCE VLADECK (Former Medicare Director): What people don't understand about Medicare is how crappy the benefit package is.

ROVNER: And asking Medicare beneficiaries with higher incomes to pay more probably won't fill the gap, either. Vladeck says that's because there probably won't be that many high-income boomer beneficiaries.

Mr. VLADECK: They've lost their retiree health benefits. They've lost their pensions. They had most of their wealth in their houses.

ROVNER: Which aren't worth nearly as much as they used to be. Then there's what Vladeck calls the regional politics of Medicare. Because the program is so large, and health care is so expensive, Medicare winds up being a major source of federal funding in virtually every congressional district. That leads to politicians often wanting to boost funding rather than cut it. That scene played out repeatedly during this year's health overhaul debate.

Mr. VLADECK: You have all these people from these allegedly conservative parts of the country saying, you know, this bill's too expensive; we can't afford it, and so forth - but holding out for special treatment and Medicare payments to providers in their districts.

ROVNER: There's one other, big problem stemming from the new health care law, says Jeff Goldsmith. It made a lot of funding reductions to Medicare providers - about a half trillion dollars over the next 10 years - but uses that money to help pay for expanded coverage for the rest of the population.

Mr. GOLDSMITH: That's a significant amount of money. And if that money is spent on extending the benefits, it certainly isn't going to be available for deficit reduction. So if you wanted to reduce the deficit, you'd have to go back and challenge the physicians, the hospital community, the health plans, to accept additional reductions - very difficult to do.

ROVNER: Most analysts say that getting a handle on health care costs in general would go a long way towards solving the Medicare problem. Only no one's sure how to do that, either.

Julie Rovner, NPR News, Washington.

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