Clinton, Congress and Medicare

Sanjay Paul
November 1996

A version of this article appeared as Congress, Clinton Need to Stop Fighting and Fix Medicare in Business Forum, Green Bay Press- Gazette, November 16, 1996.

Is Washington bathed in the warm glow of congenial bipartisanship? Don't bet on it.

Chastened by their performance in the recent elections, the Republicans have become decidedly less pugnacious of late. Even Newt Gingrich, in trying to present his kinder and gentler side, has started to speak softly about cooperating with the President.

President Clinton, too, has extended the olive branch. Realizing that Republican support is essential for the passage of any legislation, Clinton has begun making overtures to the other side. He has, for instance, indicated a preference for appointing a Republican or two to his cabinet.

Of course, not all of Clinton's appeals for "working together" can be attributed to the desire for unimpeded policy-making. Clinton is dogged by sundry troubles - Whitewater, Paula Jones, generous Buddhist monks - and a cantankerous group of Republicans could make his life very miserable.

Both parties, then, are ostensibly willing to cooperate with each other. Ah, but will they?

Take Medicare, the health insurance program for the elderly. Clinton has proposed setting up a bipartisan commission, headed by Bob Dole, to study the parlous state of the program's finances and recommend ways of rescuing the program.

Dole and the Republicans are in no mood to oblige. They are still smarting from Clinton's campaign attacks berating them for sacrificing Medicare at the altar of tax cuts for the wealthy. The strategy proved quite effective: in Florida and Arizona, two states with sizable proportions of retired people, Clinton emerged triumphant.

Furthermore the Republicans smell a trap. In order to salvage the program, the commission will almost certainly recommend reducing the growth of Medicare spending. Come election time, the Republicans fear, the Democrats will extract political mileage by denouncing their recommendations and casting the Republicans in Congress, once again, as the nemesis of the elderly. They shudder to recall the experience of the last campaign in which specious charges by the Democrats forced them to explain to the elderly that a cut in the growth rate of spending is not really a cut in absolute spending levels.

There is no doubt that Medicare is in serious trouble. The growing proportion of elderly in the country's population, the increased likelihood of illnesses and injuries in old age, the skyrocketing costs of health care - they all conspire to drive Medicare into bankruptcy by the turn of the century.

So what needs to be done to save Medicare?

One solution is to increase the payroll taxes that fund the program. This would involve raising taxes substantially - in this era of tax cuts, the prospects for such a move are bleak.

That leaves us with the choice - Hobson's choice really - of reducing payments by the government. Certain proposals that would achieve this are under consideration. One involves means- testing; under this plan, the affluent will bear a larger share of their health care costs.

The other proposals envisage a more pronounced role for the private sector. According to one, increasing numbers of elderly will be covered under HMOs. In another, individuals will stop paying Medicare taxes altogether - instead they will contribute a portion of their paychecks to tax-free accounts from which they can withdraw funds upon retirement to meet medical costs. These then are like medical IRAs. A third option is the creation of medical saving accounts (MSAs). Under this plan, individuals will use funds from the accounts to meet health expenses during the year; whatever remains at the end of the year belongs to them. This gives individuals an incentive to shop around for the best price for their health care.

All these proposals promise to change the current Medicare program quite substantially. Indeed, substantial reform is necessary to ensure the availability of affordable health care for the elderly. And the sooner Clinton and Congress get on it, the better.

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