Issue Position: Reduce Medicare Costs
Issue Position
The Medicare program is one of the greatest fiscal challenges facing America, both today and over the course of the coming decades. If the American people do not demand quick and decisive reforms, the program will most likely become an unbearable burden on our economy and will act to further destroy the value of our dollar. That's why I will fight to make our Medicare program more affordable in the future without breaking promises that have been made to our seniors.
My solutions for how to fix Medicare are listed at the bottom of this page, but I would highly encourage you to read my analysis regarding the inevitable future of the program if significant steps are not taken to reform it immediately.
Defining the Problem
Health care expenses in the United States are rising at an alarming rate every year, and they are expected to keep climbing in the future. The graph below was created by the Congressional Budget Office (CBO), and it clearly illustrates the dilemma that our nation faces in coming decades. By the year 2050, the CBO estimates that health care will cost approximately $30,000 per person each year (in current dollars). In other words, health care expenses will represent a portion of our take home pay that is four times larger than it is today. Take a moment to consider what you will have to give up to purchase the same quantity of medical services thirty-eight years from now.
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As the Baby Boomer generation begins to retire in earnest and demand more government-sponsored medical services, it will become increasingly obvious to all rational Americans that our government has made promises that it cannot afford to keep. Take a look at the chart below from the Peter Peterson Foundation.
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Notice that in 1970, our Medicare and Medicaid expenses represented a meager 5% of the federal budget. Forty years later, Medicare and Medicaid represented more than one out of every five dollars spent by our oversized government. And unless we reform Medicare and Medicaid today, our future Medicare and Medicaid obligations are expected to devour over one-third of our federal budget in the year 2040. If the projections are correct, the federal government will actually be paying more for Medicare and Medicaid in 2040 ($4.1 Trillion) than it plans to pay for the entire budget in 2012!
Why are prices rising so quickly?
The United States currently has a third-party payer health care system. In other words, the vast majority of medical services purchased in America are paid for (at least in part) by someone other than the patient. Because of this, many Americans do not know the true cost of their treatment. When a doctor makes a medical suggestion, most Americans do not ask how much it will cost. Instead, they ask if it is covered by insurance. The natural result of this mentality is obvious--we consume far more medical services than we would if we were paying for the full cost with our own money.
To make matters worse, over 83 million Americans are currently insured through Medicare, Medicaid, or military health care. These individuals pay very small premiums for their coverage and are responsible for only a fraction of their medical costs. American taxpayers pick up the rest of their tab.
In addition to that group, a Gallup poll in July of 2009 reported that 56.5% of insured Americans received health insurance through their employer. Many of these employees pay just a portion of their own premiums and have very low deductibles.
In contrast, I have a $3,000 individual deductible plan. Because I must pay the first $3,000 of medical services that I incur in a given year, I am only willing to visit the doctor if my arm is severed and must be reattached immediately. (My insurance plan wisely gives my family free wellness physicals every year as a preventative measure.) Because I have an incentive to not visit the doctor very often, I am not contributing to the continually rising demand and rapidly growing costs of health care as much as someone who goes to the doctor for every cough and cold.
Chard's Solutions to Reduce Medicare Costs Immediately
In order to reduce the costs of medical care in America, Congress must give Americans financial incentives to be responsible with their own actions and choices. As your representative in Washington, I will fight for the following reforms to reduce the costs of our health care, including Medicare and Medicaid:
I will make Health Savings Accounts (HSA's) available to all Americans and increase the tax-free contribution limits from $3,000 to $6,000 per person.
HSA's encourage Americans to save for future medical expenses by allowing them to make tax-deductible contributions that accumulate from year to year. Although government should never mandate that all Americans put savings aside for their own health care expenses, it certainly should encourage us to do so. By allowing us to save for future health care expenses on a tax-free basis, Congress will give Americans the freedom to choose health insurance plans with lower monthly premiums and higher annual deductibles. In turn, Americans will begin to take more personal responsibility for their health care purchases, and the price of health care will fall across the board.
Current law only allows an individual to contribute up to $3,100 into an HSA each year. But here's the problem. Suppose that you have an insurance plan with a $3,000 deductible that pays for 100% of services after that. If you meet your deductible in a given year, you would only be able to accumulate $100 of savings for the future.
My modification to the current law would ensure that you could set aside a minimum of $3,000 per year and actually accumulate a significant medical emergency fund for the future. As a result, by the time you retire, you will not feel as dependent on the government to provide for all of your medical needs.
I will demand comprehensive tort reform to reduce frivolous lawsuits that drive up the costs of our medical care.
Because we live in a very litigious society, many health care providers feel the need to practice medicine defensively. As a result, they administer far more tests than would otherwise be necessary. This practice obviously drives up the overall demand for medical services as well as the price that all Americans pay for those services.
Gradually and responsibly increase annual deductibles for Medicare Part B.
Annual deductibles for Medicare Part B are currently set at an unbelievably low level--$140. After that point, senior citizens have an incentive to visit the doctor as often as they feel the need because they are only responsible for 20% of the costs. By gradually increasing the deductible by a very modest amount, we could effectively discourage unnecessary trips to the doctor. This would in turn reduce the overall demand for medical services and act to lower prices for medical services across the board.
Although my proposals will not instantly fix our broken Medicare program, they certainly take a big step in the right direction. Neither the Republicans nor the Democrats are willing to offer any meaningful solutions for solving this huge financial mess. In fact, most of their proposals actually add to the long-term costs of the program. To be perfectly clear, the two parties got us into this mess through short-sighted legislation, and they have proven themselves unwilling to take steps to restore our fiscal stability. Can I count on your support this year to make sure that Indiana will be represented by someone who is serious about reducing our current and future deficits in the Medicare program?
If you have other ideas that would help make our Medicare program more affordable in the future without breaking promises that have been made to the elderly, please email me at chard@chardreid.com.
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