Bruce Bialosky

The year 1965 brought us a new program aimed at securing health care for Americans over the age of 65. This program is now becoming the centerpiece of the 2012 presidential campaign, yet many Americans don’t understand the basic financial facts about the plan, or why its sustainability is considered so essential to America’s future.

Funded by payroll tax deductions, Medicare was implemented to help pay for medical procedures, hospital costs, and doctor visits. Later a prescription drug benefit was added. Since workers paid for the plan throughout their work years, they naturally felt entitled to this important retirement benefit when they turned 65. Unfortunately, the incoming money wasn’t set aside in a separate trust fund, but was instead borrowed by the federal government to pay for other government expenses. Our leaders put slips of paper into the fund equivalent to IOUs. They called them bonds, but elected officials were borrowing the money, just like they now sell bonds to the Chinese.

So now we have what some believe is a crisis. The amounts being paid out by Medicare now far exceed what we are taking in, and reputable analysts agree that the fund will run dry by 2024 or near that time. The reasons are simple:

• The population of the United States is aging and many people are living much longer.

• Technological innovation has driven up the cost of medicine. Things like MRIs, knee replacements, and heart stents have preserved lives, but cost lots of money.

• Third party payments for services. You may not agree with this point, but when a “customer” doesn’t personally pay for a service, there is usually less concern about the price. Because insurance companies and government programs pay for so much health care, people are less diligent about controlling costs.

In 1965, the cost of the Medicare program was projected to be $9 billion in 1990; it was actually $65 billion. Since then, the number has skyrocketed. Medicare spending was about $560 billion in 2011, and is slated to grow to nearly $1 trillion by 2022 – an amount generally agreed by both political parties to be unsustainable. There may be a few diehards who don’t believe we need a significant change of trajectory, but I haven’t spoken to them.

Now we have a Vice-Presidential candidate who has come out (before he was selected) with a plan to reform Medicare. You can disagree with his proposal, but you can’t disagree with the fact that he has a thoughtful, concrete plan, co-sponsored by Democratic Senator Ron Wyden from Oregon – which makes it bipartisan.

Simply put, it does the following:

• Anyone over 55 years old wouldn’t see any change to Medicare as it is currently constituted.

• Anyone younger than 55 would be given an option. Either they could choose a private insurance company (similar to the Medicare Advantage program instituted in the 1970’s), or they could enroll in Medicare as a fee-for-service program that would continue to pay directly for care. The difference is they would be given a quantified amount to pay for their insurance where there would be caps depending on financial need.

No onecurrently receiving Medicare would be affected and everyone else would have a ten- year window to plan for the changes ahead. This may be a perfect plan, a lousy plan or something in-between depending on your perception, but it is a plan to confront the problem.

The President doesn’t like to speak of how he has altered Medicare, but his spokesperson, Stephanie Cutter, admitted on Face the Nation that there is a $700 billion cut to Medicare in the Affordable Care Act (Obamacare). She stated that this was a reduction of payments to insurance and drug companies, but they are clearly cuts and they go into effect on January 1, 2013. She also stated that the President plans another $300 billion in cuts in his current plans.

American politicians are afraid of discussing cuts to any program; after all, whenever there’s a cut, someone gets less than they currently receive. But many people are also legitimately frightened by our out-of-control budgets at all levels of government, and the realization that we have made future commitments that are completely unsustainable. You may not believe that, but more and more Americans clearly shiver as cities are going bankrupt while we’re mortgaging our future with annual trillion dollar budget deficits and a national debt of $16 trillion.

The question that we all must face is can either Medicare or Social Security remain sustainable when we have deficits this large? With the national debt ballooning, expenditures for entitlement programs will be squeezed out by interest payments. What happens to these programs when interest rates rise which we all know will have to happen sometime and probably not too long from now?

The President and his allies have confronted the issue, but appear reluctant to say they have. This is made worse by the fact that it’s unlikely that Congress will ever approve the cuts. After all, for each of the past several years, Congress has approved a bill to “adjust” (raise) Medicare payments to doctors so that seniors don’t scream when their doctors refuse to provide services.

Mitt Romney and Paul Ryan are betting that the American people will not be scared into believing that Medicare is going away. They believe that Americans realize that there is a severe crisis, and that things have to change before we’re forced to change. And they have faith that seniors understand that even though they won’t be personally affected by Ryan-Wyden, changes must be made for the benefit of their children and grandchildren. Time will tell whether they are correct. But let us be clear, Mr. Romney has never adopted the Ryan-Wyden Plan and he is the presidential candidate not Paul Ryan.

You now have the facts in terms as simply as can be stated and hopefully in as unbiased a way as possible. You are smart enough to make your own decision.


Bruce Bialosky

Bruce Bialosky is the founder of the Republican Jewish Coalition of California and a former Presidential appointee. You can contact Bruce at bruce@bialosky.biz