Medicare Funding Alert: President Bush Sends Required Legislation to Congress; Financial Peril of Program Becomes More Pronounced

Ronald Szabat, J.D., LL.M.
Executive Vice President – External Affairs and General Counsel


magine a major categorical health entitlement program designed for retired Americans with an average life expectancy of less than 68 years. Imagine a world without modern advances in critical care, pain medicine, anesthesiology or surgery. Imagine political pressures that insulate truly wealthy seniors from the true costs of health insurance should the first two assumptions change. And now, imagine “fast-forwarding” some 40-plus years to an age where NASA-size investment has made American medicine the envy of the world, the average life expectancy is nearing 80, and medical advances abound.

What’s a successful Medicare program to do to stay afloat? These were the sorts of questions facing congressional negotiators as they worked to keep alive the “Medicare Modernization Act of 2003” (MMA), which ironically added a budget-busting new Part D prescription drug benefit to the venerable program several years ago. And in a small gesture to fiscal frugality, these same negotiators added a constitutionally suspect requirement in that law that required the president to send a bill to Congress to “control spending,” if and when overall government financing for Medicare went over 45 percent of the program’s cost in any one year.

Surprise! That year has now arrived. Right now, in 2008, the rapidly dwindling Medicare trust fund is fast approaching being unable to finance roughly half of the program’s annual costs. That situation will only worsen soon. In other words, general tax revenues — as opposed to the payroll taxes that you and I and all working Americans pay every day — are beginning to take the front seat in financing America’s health insurance promise to the elderly and disabled.

So, what is this new “required” bill all about? As with all things legislative, substance and form are often difficult to tell apart. Seizing the apparent political opportunity, while meeting the letter of the MMA law, the Bush Administration has dispatched a bill to Congress that arguably meets the “requirements” of the MMA law, but whose fate seems far less rooted in reality.

For example, as part of the president’s “Medicare Funding Warning Response Act of 2008,” the second title includes well-developed language, almost universally backed by organized medicine, that would put in place sensible caps on non-economic damage cap awards in medical liability cases. This is no doubt a great way to rein in wasteful “health” spending, but the trouble is, no previous attempts have succeeded in “passing” this bill language, even when the Republicans controlled Congress, as they now do not do, and medicine worked the issue as its top priority.

Still other parts of the president’s new bill would advance “value-based” purchasing into Medicare for over half the program as well as push electronic medical records on an interoperable and personal basis. Under the bill, the Secretary of Health and Human Services also would have to provide comparative “episodes of care” data. These are policy issues worthy of extended debate, but hardly items on which the details have been worked out.

Where does that leave us? Well, by now, you’ve gotten the picture. Alarms are going off, and the arguments for reform are being made. But this so-called MMA “trigger” bill is not the apparent mechanism to start true reform, even with a Medicare program listing from under-funding! Indeed, with at least two major presidential candidates promising yet broader health care access for the uninsured and underinsured without talk about who will pay and how much, financing of the old stalwart Medicare program is simply being neglected.

No wonder physicians are increasingly frustrated about Medicare payment in general and the annual, now semi-annual, pleas for relief from the cuts being brought about by the sustainable growth rate formula. In Congress itself, be it from the president or others, the needed “new” money to solve the ills of Medicare is not readily apparent short of major budget agreements to the contrary.

To that end, as Congress attempts to fashion its own budget agreement for the next year, all eyes, hearts, minds and trigger fingers will remain on its efforts to fix Medicare. This will not be an easy fight, but please stay tuned and get involved by talking to your members of Congress! The picture and story get more interesting and alarming by the month!