Opinion A fiscally responsible government cannot keep its hands off Medicare

March 23, 2023 at 3:07 p.m. EDT

5 min

Editor’s Note: This editorial is part of a series that looks at the challenges of tackling the growing federal debt and the specific programs that drive it. Read the previous installment on Social Security.

Medicare is a successful component of the American social safety net. As of September, it covered 65.1 million people, 85 percent of them elderly. (The remainder were certain disabled workers and people with amyotrophic lateral scerlosis, commonly known as Lou Gehrig’s disease, or end-stage renal disease.)

It is also expensive: During fiscal 2022, the program accounted for $710 billion in federal spending, which was 11.4 percent of the $6.2 trillion total, according to the Congressional Budget Office. By 2028, the Medicare trust fund, which pays for hospitals, skilled nursing facilities and hospices, and is financed by payroll taxes, is expected to be exhausted. No rational approach to fiscal sustainability could wall off so many of the dollars that Washington spends every year. And yet that is what a de facto bipartisan consensus in Washington has effectively done.

This has to change. To be sure, President Biden proposed, in his 2024 budget, changes that would keep Medicare solvent for 25 years. He would accomplish this by adding more drug price negotiations (on top of the ones in last year’s Inflation Reduction Act) and raising a tax on the investment income of people who earn more than $400,000 a year. The president deserves credit at least for discussing the topic, but his plan is mostly political messaging rather than a serious approach to the issue. It places the entire burden of ensuring Medicare solvency on unpopular drug companies and high-income earners, implying — incorrectly — that structural reforms are unnecessary. Such changes could be carried out with relatively modest sacrifice from beneficiaries, in return for which all Americans would enjoy the security of a program built to last.

Containing costs for Medicare Advantage

Containing costs for Medicare Advantage, the alternative to “traditional” fee-for-service Medicare that now covers roughly half of all beneficiaries, is probably the most important step the president and Congress could take. Under Medicare Advantage, private health insurance companies provide managed-care coverage to Medicare-eligible patients in return for a per capita payment from the government. Many enrollees prefer Medicare Advantage plans because they can cover dental and vision needs, which regular Medicare does not.