The Time to Venture Into Medicare Reform Is Now

Fundamental changes to keep Medicare from collapsing under the weight of steadily rising health costs and an expanding older population await future action by Congress, but a bill promising a modest and needed start toward reform has won bipartisan backing from the Senate Finance Committee.

For the first time, better-off Medicare recipients would be required to pay a higher deductible under the program’s Part B, which covers doctors’ bills. In place of the uniform $100-a-year deductible paid by all who voluntarily participate in Part B, the deductible would rise according to income. Individuals with incomes above $50,000 and couples above $75,000 would see their out-of-pocket physician costs climb to $540 per person. At incomes above $100,000, or $125,000 per couple, the deductible would reach a maximum of $2,160 a person. In short, the system would be at least partially means-tested. This is, we think, an idea whose time has come, although the specific figures may bear adjusting. Only about 4% of Medicare’s 38 million beneficiaries would be affected.

Part B is one of the great bargains in the spectrum of government entitlements. Each beneficiary pays a premium of little more than $46 a month, which covers less than 30% of the program’s costs. The rest comes directly from the national treasury. Two years ago the Republicans produced a plan to gradually increase these premiums to help offset Medicare’s soaring per-person costs, which were projected to rise from $4,800 in 1995 to $6,700 in 2002. The idea died, along with the rest of the GOP’s comprehensive Medicare reform package. It was revived this week, if only in part, by Sen. Bob Kerrey (D-Neb.).

Bipartisanship in the Finance Committee offers no assurance of a consensus elsewhere in Congress, for means-testing Part B deductibles would set a precedent that some fear could invite similar higher costs or reduced benefits in Social Security and elsewhere in the Medicare program for those with higher incomes. Those concerns may not be unfounded.

The American population is inexorably aging. Today, about one in eight Americans is over 65. Soon it will be one in seven, and not long after will come the flood of baby-boom retirees, increasing the stresses on entitlement programs. Indeed, projections suggest, not too far along in the coming century entitlements could consume virtually the whole of the federal budget.

In the coming collision between demographic and fiscal realities, new approaches will be unavoidable. The idea of reducing or ending subsidies for the better-off, we believe, ought to be one of them.