12/13/2010 06:02 pm ET | Updated May 25, 2011

Social Security Isn't the Problem... But Fear for the Future of Medicare

Before Gray Matters leaves the dismal subject of President Obama's misbegotten Frankenstein monster, the deficit reduction commission, there is one tiny sliver of decent news from its lone genuine liberal, Illinois Rep Jan Schakowsky.

In one of her many television interviews, she noted that the information that the members of the commission had at last come to terms with the fact that Social Security's pension insurance system, which is self-supporting with payroll taxes and minimal administrative costs does not, repeat, not add to the deficit.

Therefore, she said their "proposed reforms," like slowly raising the retirement age, are meant only to stabilize its finances for the next 75 years. We now know that nothing so drastic as cutting benefits, which is what raising the retirement age will do, is simply not necessary, as Obama has said. But alas, our unpredictable president, of questionable principles, as Time Goes By as demonstrated on the past few posts, has done his damndest-with the suspension of the payroll taxes-to make life more difficult than it needs to be for Social Security.

But that's not what I wanted to draw from Schakowsky's observation. Her fear is not for the long term future of Social Security, but the more immediate dangers for the 47 million of us who depend on Medicare. It is true that the Affordable Care Act, strengthened Medicare's Part A trust fund and cutting the subsidy for Medicare Advantage, has helped the finances and the fortunes of Part B.

But except for Schakowsky, virtually every member of the commission is about to pounce on Medicare because health care-but not necessarily Medicare -- is the largest and fastest growing target for cutting the deficit. Never mind that our for-profit health care system is filled with greed and corruption and is a drag on Medicare. But it's advocates are being heard. As I mentioned last time, a coalition of liberal economists in a Citizens Commission, including former Labor Secretary Robert Reich, economist Dean Baker and this time, joined by separate statements from AARP, have protested strongly that the problem is not Medicare. As the Citizens Commission wrote, "Alarming long-term projections of growing debt almost completely come from uncontrolled growth in health care costs. We do not have an entitlement crisis we have an unaffordable health care system."

Nevertheless, the key members of the deficit commission, with nods of approval so far from its creator, the President, would pick on what Obama's Co-Chairman, Alan Simpson, called the "lesser people" for the unkindest cuts. Even the mildest medicine, proposed by Simpson and his buddy, former Clinton aide Erskine Bowles, would put a cap on and stunt the growth of Medicare, even though other health costs are mostly responsible for that growth. In addition, as I wrote, the eligibility age for Medicare-for you children-would rise to 68.

Your expensive Medigap policy will be worthless: Bowles-Simpson would exclude the first $500 of coverage and limit coverage to 50 percent of the next $5,000. Your annual out of pocket costs could rise to $7,500. And as I mentioned the experiment for getting the feds into long term care, called CLASS, proposed by a dying Ted Kennedy, would be abandoned. From Bowles-Simpson, the gutting of original Medicare goes from bad to worse.

Former Clinton Budget Director Alice Rivlin and former Sen. Pete Domenici, would raise the already onerous 20 percent co-insurance for Part B to 35 percent. And starting in 2018, their plan would substitute the present system -- the government pays the bills -- with a "premium support" system in which the beneficiary would get a certain amount of money to shop for his/her coverage. Can you imagine going from the current system, which is confusing enough, to one in which beneficiaries, including the oldest men and women living in nursing homes, must shop each year for private insurance? Who would regulate the insurers?

Even worse, Rivlin and her new ally, right-wing ideologue Rep. Paul Ryan, R., Wis., would completely privatize what most Americans consider the best health insurance they can get. What makes this a dangerous possibility is the fact that Ryan will become chairman of the House Budget Committee. Under his market-oriented and proposal, we would take the system that accounts for most of the present problem and make it worse.

Starting in 2021 people who turn 65 will receive vouchers to buy private insurance through a new
Medicare Exchange. Vouchers would be worth $11,000 (surely that will be enough to treat a cancer), although adjustment may be made depending on the illness. Of course, it will be up to the sick or dying beneficiary to argue his/her case with the insurer.

"I don't think there's any question that there's intensifying pressure to control Medicare costs and that pressure is going to intensify more over time when you look at the deficit and you see that really Social Security is a minor contributor. It's mainly health care," said Jonathan Oberlander, professor of social medicine at the University of North Carolina. "Medicare has long been about budget politics."

While Medicare makes the most tempting target for cuts, John Rother, AARP's executive vice-president said "The burden of Medicare's out of pocket costs is already very high, to the point
where many people are literally having to choose between the necessities of life and health care. I don't think it's possible or advisable to further load people of modest incomes with very high health care costs."

Rother has signaled that AARP, which successfully fought off the 1995 Bush administration effort to privatize Social Security, will be even more militant on Medicare's behalf. As important, the American Medical Assn., has become a strong Medicare defender, especially since the Congress last week, stopped for a year the pending 23 percent cut in the program's payment for doctors. The year is expected to give lawmakers time to rewrite the formula for setting the fees.

Tricia Neuman, director of the Kaiser Family Foundation's Medicare Policy Project, decries the premium support and voucher proposals and says the Affordable Care Act can help keep Medicare costs down. Recently, the Department of Health and Human Services, began writing regulation for an important part of the new law, called the Medical Loss Ratio, requiring insurers to spend 80 to 85 percent of health care premiums on actual health care rather.

Getting back to Ms. Schakowksy, she had only one Medicare reform to propose, that it require Medicare to scrap Part D and establish a Medicare drug plan and that Medicare be required to negotiate prices with drug companies.

Since the deficit commission seems to agree that the present system is flawed and too costly, I'd go one step further and propose what Obama used to favor-Medicare for All. But that was before he lost whatever it is that he once believed.

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