The Medicare premium increase announced last week - the largest in the program's history - has ratcheted up campaign accusations on both sides. John Kerry's campaign is accusing President Bush of failing to restrain the escalation in health costs that is propelling the increase, but this is not an issue that lends itself readily to a blame game. The inescapable truth is that costs throughout the health care system, not just in Medicare, continue to escalate. Someone - generally the patients or the taxpayers - must pay the bills. The question raised by the Medicare premium debate is whether too much of the burden is now falling on beneficiaries.
There is no doubt that the higher premiums will be onerous for elderly Americans whose income is just a bit too high to qualify for various subsidies. The Medicare Part B premium, which covers doctors' services and outpatient costs, will jump by 17.4 percent next year, to $78.20 from $66.60 a month. That increase of $11.60 a month will take a big bite out of the annual cost-of-living increase added to Social Security checks, thus eroding beneficiaries' ability to meet rising costs in other areas.
In the current year, for example, retirees with a monthly benefit of $1,000, about the average for retired men, saw nearly 40 percent of their cost-of-living increase eaten up by a Medicare premium increase, while more than a million Americans had their entire Social Security increase wiped out by the higher premiums.
The Bush White House points out, correctly, that most of the increase is based on laws that Mr. Kerry supported in the Senate. By law, beneficiaries are required to pay 25 percent of the costs of the Medicare Part B program, while general tax revenues pay for the other 75 percent. The biggest factor driving up the costs of the medical care outside hospitals is an increase in payments to doctors. Like most things about Medicare, the doctors' fees are based on a formula, which actually dictated that fees be cut 4.5 percent. But Congress yielded to the pleas of medical lobbyists and granted a 1.5 percent increase instead. Critics may see this as caving in to special interests, but the rise will not allow the doctors to keep up with inflation.
The next biggest factor in the premium increase is the need, seemingly indisputable, for money to beef up a reserve fund so it is actuarially sound. About $1.75 of the monthly increase will subsidize managed care plans that participate in Medicare. That, too, was a bow to lobbyists from the H.M.O.'s, though Senator Kerry supported a small portion of it as a way to protect prescription drug benefits during the transition to the new Medicare drug program.
Medicare costs are obviously an important issue - but the proper focus of criticism isn't a premium increase that in the main looks justifiable, given the current ground rules. The real question is whether the Medicare burden is being shared equitably.
The current framework was set in the Balanced Budget Act of 1997, which saved the government money by limiting Medicare payments to hospitals, doctors and health plans and by pushing more of the burden onto beneficiaries. That act was widely praised at the time as a model of fiscal discipline. But in subsequent years, the providers of health services - like hospitals, doctors and health plans - have all convinced Congress that they were dealt too severe an economic blow and have won relief from the pain. No such relief was provided to the beneficiaries of Medicare.
Medicare's problems will not be solved until the underlying problem of the rapid rise in health care costs is solved. Mr. Kerry urges a war on waste and fraud, which sounds appealing but is unlikely to produce huge savings. Mr. Bush says private-sector competition is the answer, but that idea seems delusional. Neither is going to produce any short-term relief for older people who can't afford the new premium increase.
Copyright 2004 The New York Times Company (emphasis added)
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