Monday, October 3, 2011

Five ways to squeeze Medicare

Nearly 50 million people on Medicare, as well as those entering the program at a pace of one every eight seconds, are likely to get more than their money's worth before they die.

The same can't be said for anyone under 55 who will rely on the federal health care program for those 65 and older in the future. They face higher costs and, possibly, longer waits before they qualify for coverage.

Medicare — one of the most popular programs ever devised by the federal government — is on the chopping block. Again.

But just a year after President Obama's health care overhaul called for $500 billion in Medicare savings, a variety of factors may protect the program this time. An effort to exempt older workers from cuts, the advertising and lobbying clout of health care providers, and the approaching 2012 elections all point toward putting off major changes.

"There's not much left in the well," says Dan Mendelson, CEO of Avalere Health, a consulting firm. "There's nothing that is politically acceptable or pain-free."

Since its creation in 1965, Medicare has risen in public esteem. Today it enjoys the sort of favorable ratings President Obama and Congress can only dream of.

Since the late 1980s, Medicare has battled efforts to tame its explosive growth or make it more self-sustaining. Powerful lawmakers have been chased down city streets and lofty commissions rendered impotent by the forces that rely on Medicare for their health or wealth, from the AARP to the American Medical Association.

Today the program is again the top target of budget-cutters. They know the nation can't keep running the $1 trillion annual deficits that have sent the national debt to $14.7 trillion — nearly the size of the $15 trillion economy.

The aging of the Baby Boom generation will boost enrollment by 1.6 million annually over the next two decades, bringing it to 81 million by 2030. Actuaries must project out 75 years; when they do, they see 120 million people on Medicare.

Its annual cost — $555 billion, more than 15% of the federal budget — will rise to 18% of the budget within a decade. Over the next 75 years, it will owe $38 trillion to its beneficiaries.

So clear is the need to trim the program that Obama and Congress agreed on a deficit-reduction law in August virtually guaranteeing some reductions: If lawmakers fail to do it themselves, automatic cuts will begin to squeeze up to 2% savings from almost every part of the program.

Here's one problem for the budget-cutters: There's not much appetite among policymakers to give less to those age 55 and up, who will qualify for the program within 10 years.

Here's another: Doctors, drugmakers, hospitals, medical colleges, home health providers, medical equipment manufacturers and insurers have been targeted before — most recently in last year's health care law. They agreed to those cuts because the overhaul is projected to expand insurance coverage to 32 million people who likely would seek more services. This time, they have no such incentive.

And another: Although a 12-member congressional "supercommittee" has until late November to propose a deficit-reduction plan, the following November already beckons. That's when Obama and most members of Congress run for re-election. In 2008, 70% of seniors ages 65 to 74 turned out to vote, the highest rate of any age group.

The message from many Medicare beneficiaries, says Robert Blendon, professor of health policy and political analysis at Harvard University's School of Public Health, is simple: "Don't cut my benefits, and don't ask me to pay a lot more for what I have."

Most Americans, in fact, are protective of Medicare. A non-partisan Kaiser Family Foundation poll in September found that 51% of people didn't want Medicare cut at all to reduce the federal deficit. Only 13% favored "major reductions."

To make sure lawmakers get the picture, AARP, the nation's biggest seniors group with 37 million members, is running a multimillion-dollar ad campaign. "We're giving voice to what people actually tell us," says legislative policy director David Certner.

Here are five ways Medicare could be squeezed — and the reasons it will be difficult.

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