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Recession’s impact on Medicare fund another reason to do health reform now

Pending Medicare report could show that surplus could be exhausted much sooner than expected

April 9, 2009

Statement of Consumers Union on the pending 2009 Medicare Trustees’ Report

Trustees Report is another reason why we must do comprehensive health reform this year

The Congressional Budget Office’s estimates last week showed that the sharp recession has significantly hurt the Social Security Trust Fund, reducing total income roughly $1.3 trillion over 10 years. We can expect the soon-to-be released Medicare Trustees Report to project something similar — with a possible projection that Medicare Trust Funds will receive about a third of a trillion dollars less over the next decade.

In 2008, the Trustees said that the Medicare Part A trust fund surplus would be exhausted in 2019. Because of the recession, that number is likely to be sooner—less than a decade from now.

If the Trustees Report predicts a shorter life to the Medicare Trust Fund, many will cry that the sky is falling and demand huge cuts in Medicare spending. Others will cite it as an example that Medicare is wasteful while ignoring the uncounted waste in the private sector. And others will cite it as “proof” that a public plan option like Medicare should not be included in any health reform proposal, even though private plans are more costly.

But the truth is, Medicare has inflated less than the private health insurance sector over the years. The truth is, America’s entire healthcare sector, public and private, inflates too rapidly. And the truth is we cannot just cut Medicare without creating quality and access problems in that program and in the private sector. And we cannot just shift more costs willy-nilly to beneficiaries when Social Security is the only source of income for nearly one-in-five seniors.

We need a total solution to both private and public healthcare inflation.

Instead of new proposals to cut just Medicare and Medicaid, we need smart thinking to slow all health inflation. Cutting just Medicare or Medicaid is like squeezing a balloon—it will only cause bulges and distortions in the balloon.

In both the public and private sector, we need rapid implementation of health information technology, bundling of post-acute care and denial of payments for re-admissions due to poor quality of care, use of comparative effectiveness research to help physicians and purchasers make better decisions, a system to approve safe generic biologic medicines, more anti-fraud efforts, and pay-for-performance that rewards quality and punishes mindless overuse of services.

We need comprehensive healthcare reform to give us a comprehensive answer to the cost-inflation problem.

The Trustees Report is another reason why we must do comprehensive health reform this year.

Contact: Bill Vaughan, senior policy analyst, 202-462-6262