Bloomberg Anywhere Remote Login Bloomberg Terminal Request a Demo

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Businessweek Archives

Commentary: Quick Send Medicare To The E.R.


News: Analysis & Commentary

COMMENTARY: QUICK-SEND MEDICARE TO THE E.R.

Social Security checks provide a nice retirement cushion for Justin Kawaler, the former owner of four furniture stores in Queens, N.Y. But Kawaler's government checks didn't even begin to cover the enormous medical bills incurred by his 74-year-old wife, Evelyn, who underwent an operation for cancer in 1990, followed by two years of expensive follow-up procedures. Medicare picked up the tab. "Everybody I talk to in the waiting rooms says that without Medicare, they'd go completely broke," says Kawaler.

As hospital costs climb, Medicare becomes ever more important to the elderly. Yet far faster than most people realize, the strain of covering soaring bills is pushing the program toward insolvency. An Apr. 3 report from the trustees of the Social Security system shows that cash flow at Medicare's hospital-insurance program, which provided $103 billion for 36 million patients last year, will be negative in 1997. And by 2002, its cash reserves of $134 billion will be exhausted.

SKITTISH. Rather than seek a fix, however, Washington is pretending there's no crisis. House Republicans are hoping to bleed Medicare to pay for tax cuts or deficit reduction. The GOP's Contract With America even promises to roll back a 1993 tax hike that was designed to buttress Medicare. Meanwhile, the White House is skittish about proposing any new reforms after its health initiatives failed so spectacularly last year. "There has been a willing suspension of disbelief here and a misguided hope that the problem will somehow just go away," says Roland E. King, the government's chief health actuary from 1978 to 1994.

In reality, Medicare's problems are so severe that a major overhaul is required. A quick-fix mixture of benefit cuts and administrative reforms would buy enough time to fashion a longer-term solution. But Medicare can't be cured completely without an overall health-care reform that will slow the medical inflation rate. "If health-care costs continue to escalate at the current rate, we'll never get Medicare caught up," says Eugene Lehrmann, president of the American Association of Retired Persons. Indeed, without drastic reform, Medicare's share of overall Social Security benefits to the elderly is expected to reach 50% by 2011, up from 32% today and 18% in 1970.

The first step should be a careful look at the problem. Yet no panel is even examining Medicare, and the Administration is not highlighting the crisis. "It's very important that Medicare doesn't become politicized," says a senior Administration official. Translation: By acknowledging the situation, Clintonites would have to propose a solution. As insolvency looms closer, however, retirees won't be letting politicians skirt the issue much longer.By Paul Magnusson


LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus