Medicare “As We Know It” Must Be Changed, Or Else

June 6, 2011 - Medicine “as we know it” must be changed, or it will go bankrupt and possibly bankrupt the nation.

The Obama administration is already transforming Medicare by promising to cut $575 billion out of it over the next ten years by cutting out fraud and abuse, ending Medicare Advantage plans for 11 million seniors, and lowering doctor and hospital payments to below those of Medicaid by 2019.

Below are two comments on why Medicare must change.

One, Robert Samuelson,”The End of Medicare As We Know It,” Columnist , Newsweek and Washington Post, June 6, 2011

WASHINGTON -- Almost everyone agrees that America's health care system has the incentives all wrong. Under the fee-for-service system, doctors and hospitals get paid for doing more, even if added tests, operations and procedures have little chance of improving patients' health. So what happens when someone proposes that we alter the incentives to reward better care, not more care? Well, Rep. Paul Ryan and Republicans found out. No surprise: Democrats slammed them for "ending Medicare as we know it."

This predictably partisan reaction -- preying upon the anxieties of retirees -- must depress anyone who cares about the country's future. It is only a slight exaggeration to say that unless we end Medicare "as we know it," America "as we know it" will end. Spiraling health spending is the crux of our federal budget problem. In 1965 -- the year Congress created Medicare and Medicaid -- health spending was 2.6 percent of the budget. In 2010, it was 26.5 percent. The Obama administration estimates it will be 30.3 percent in 2016. By contrast, defense spending is about 20 percent; scientific research and development is 4 percent.

Uncontrolled health spending isn't simply crowding out other government programs; it's also dampening overall living standards. Health economists Michael Chernew, Richard Hirth and David Cutler recently reported that higher health costs consumed 35.7 percent of the increase in per capita income from 1999 to 2007. They also project, that under reasonable assumptions, it could absorb half or more of the gain between now and 2083.

Ryan proposes to change that. Beginning in 2022, new (not existing) Medicare beneficiaries would receive a voucher, valued initially at about $8,000. The theory is simple. Suddenly empowered, Medicare beneficiaries would shop for lowest-cost, highest-quality insurance plans providing a required package of benefits. The health-care delivery system would be forced to restructure by reducing costs and improving quality. Doctors, hospitals and clinics would form networks; there would be more "coordination" of care, helped by more investment in information technology; better use of deductible and co-payments would reduce unnecessary trips to doctors' offices or clinics.

It's shock therapy. Would it work?

Two, Jane Orient, MD, “Pushing Granny off The Cliff, “ Executive Director of the Association of American Physicians and Surgeons, www.aapsonline.org

The latest Mediscare ad shows Congressman Paul Ryan (R-Wis.) pushing an old woman in a wheelchair off a cliff. The Republicans are allegedly killing “Medicare as we know it.” But this is a diversion from the real question: What will “healthcare reform” or ObamaCare do to Granny? Democrats may hope to keep Americans from figuring that out until after the 2012 election.

The Medicare issue is demagogued to gain votes in every electoral cycle. And hardly any politicians are telling the whole story.

The ad has one element of truth. There is indeed a financial cliff, and Granny is heading over it—along with the rest of us. Actually, the cliff is more like the edge of a deep canyon of reckless deficit spending and a crippled economy. The canyon has been growing deeper and deeper, at an accelerating rate. The edge is coming closer and closer. Soon Granny won’t even need a push.

Paul Ryan is not responsible for it. The excavation was mandated some 75 years ago, when Social Security was originally set up, and the problem was greatly magnified in 1965, with the passage of the amendments that created Medicare and Medicaid. The fact is that Social Security and Medicare were never adequately funded. They were structured as Ponzi schemes from the beginning.