12/05/2012 01:07 am ET Updated Feb 03, 2013

Is Health Care Part of the "Fairy Dust" Talk About the Fiscal Cliff?

I don't know about you but I'm getting really tired of the hysteria over this so-called, somewhat media created, "fiscal cliff" thing. The White House called the Republicans' latest proposal "fairy dust." But I do think we are in for some changes in health care as a result of the discussions going on in Washington, D.C., so I thought you should know what to expect.

First, try to ignore the hysteria. Whatever laws will expire December 31, there will be a solution and at some point we will need to restructure and reform some of our government programs. Which ones? Probably Medicare. Maybe Medicaid. And at some point, although certainly not urgent now -- Social Security. The Republicans want you to think that without "entitlement reform," we cannot reach a deal on the so-called fiscal cliff.

But step back for a moment. We call Medicare, Medicaid and Social Security "entitlements" although this term does recall something akin to Romney's 47 percent idea. Perhaps we should rename these programs. Does everyone who depends on these programs think they are somehow "entitled" to something they don't deserve? We pay into Social Security. We pay for Medicare -- and don't you think we do not. ( Medicare Part A may be without premium, but Medicare Parts B and D extract significant premiums from beneficiaries, and the more you make the more you pay for these "entitlements". ) Don't even get me started on why we need to attack these programs and gut them. They protect some of the most vulnerable disabled and elderly among us. If you had to look these folks in the eye and tell them they were taking too much and not giving enough back -- good luck if they could reach out and punch you.

So what are the proposals for -- let's call it "saving money" in Medicare and Medicaid? I'm leaving out Social Security since it is not in urgent need of reform at this time. It is solvent until the late 2040s or early 2050s. There are a number of legitimate ways that we can modernize and improve the Medicare program. Many of these proposals are already being implemented as part of the Affordable Care Act.

Raising the eligibility age from 65 to 67 is not one of the best ideas for saving money in Medicare. Sounds like a reasonable idea, right? We are living longer, so why not work longer. Well, it's not quite that simple. Yes, there are savings to the government if people don't depend on Medicare until they are 67 or older. But who ends up paying for health care for people who do not get it from Medicare when they turn 65? It would be the private sector and other programs. If the age limit were to be raised, roughly half of potential beneficiaries would work longer, thus requiring their employers to continue covering them; about 5 percent would remain uninsured. Of the remainder, one-third would seek coverage and potentially subsidies through the state exchanges, which would raise the premium costs for everyone. A Kaiser Family Foundation study estimates that raising the Medicare eligibility age would increase overall premiums in the state exchanges by 3 percent and 8 percent for younger members. And while this increase in eligibility age would net the Federal Government $5.7 billion, it would cost 65- and 66-year-olds $3.7 billion in additional out of pocket costs.

Despite the math, Republicans still want to raise the eligibility age for Medicare, so don't count this out as a solution that might end up on the table.

What other savings are possible for Medicare and Medicaid?

One option is for the wealthier elderly to pay more. In the Obama Administration proposal, most of the cuts come from changes in reimbursement to providers -- very little comes from beneficiaries. But there are some areas where "wealthier" Medicare beneficiaries (e.g. individuals who have a Modified Adjusted Gross Income -- MAGI- - of more than $85,000/year and couples with a MAGI of over $170,000) would pay more for their Medicare. How much? These seniors would pay 15% more for physician visits and drug coverage. They would also pay more for their Medigap premiums and all new beneficiaries would pay a $25 "deductible" for doctor visits. The Republican plan is not specific, but we can assume that it would include even more cost shifting to beneficiaries.

The program for single women with children, the disabled and blind -- Medicaid -- might also be cut, although most cuts would be targeted at providers (hospitals, doctors, drug companies) who provide care for these beneficiaries. As long as the Democrats have the Senate and the White House, Medicaid is not likely to become a complete block grant to the states, where eligibility and benefits could be severely restricted. Meanwhile, there are certainly ways that health care can be more efficiently provided to Medicaid beneficiaries, including having the government do a better job of negotiating drug prices.

The Center for American Progress has a much simpler plan that protects domestic programs (non-entitlements) from further spending cuts and generates Medicare savings from specific reform to the delivery system.

So there are ways to get to deficit reduction and economic growth without gutting social programs? Yes indeed, and we can hope that the Democrats will hold the line and keep the focus on areas of savings which do not hurt the most vulnerable.

For an earlier version of this post see "Is health care headed for the fiscal cliff?" at

Also see other posts by Linda Bergthold at