Lawmakers Promise To Stop Kicking The Can On Medicare Solvency

Federal lawmakers say they’re aware the clock is ticking to address Medicare solvency, but have yet to arrive on a clear path forward.

During a hearing on federal entitlement programs on Thursday, members of the U.S. House Budget Committee on both sides of the aisle said they support acting soon to bolster the flagging finances of the mammoth insurance program, which provides health benefits for more than 67 million senior and disabled Americans.

“We’ve got to step up and do something about this. We’ve got to make some changes,” said Rep. Ron Estes, R-Kan.

Medicare faces acute financing challenges as more baby boomers age into the program, causing beneficiaries in the program to swell even as the number of workers paying into it shrinks. That’s creating a long-term funding imbalance, according to government actuaries and program watchdogs. 

Absent federal action, a key trust fund underpinning Medicare’s hospital benefit is expected to run dry by 2036. At that point, the government won’t be able to pay out full benefits for inpatient hospital visits, nursing home stays and home healthcare.

Lawmakers have never allowed that tranche, called the Hospital Insurance Trust Fund, to become depleted. However, despite increasingly dire warnings from Medicare overseers and some bipartisan efforts to lower spending in the early 2010s, Congress has perennially delayed taking action.

“For a long time Congress has been kicking the can down the road and now we’re kicking an oil can down the road. The problem is only getting worse and closer to us,” said Rep. Scott Peters, D-Calif.

Lawmakers have put off Medicare reform because it’s a tricky political calculus. Getting Medicare’s finances back on track requires Congress to either increase revenues by increasing taxes, or lower expenditures by cutting benefits or raising the eligibility age, testified CMS chief actuary Paul Spitalnic during the hearing. Neither is popular with seniors, a reliable bloc of voters.

But “delaying a response means that there needs to be a more dramatic response later on,” Spitalnic said.

Earlier this year, the Republican Study Committee — a group that includes 80% of House Republicans — released a plan to restructure Medicare to a “premium support model” in which seniors would essentially receive vouchers to shop for policies in a market with traditional Medicare and private plans competing for their business.

Republicans said the plan, which would also repeal Medicare’s new authority to negotiate drug prices, would place Medicare on more solid financial footing.

Health policy researchers and Democrats in Washington slammed the plan as extreme. The bashing continued on Thursday, with Democrats in the Budget committee seeking to differentiate their ideas to stabilize Medicare — which generally involve raising taxes on wealthy Americans — from the cuts.

The Republican Study Committee report “is part of letting Medicare wither on the vine,” said Rep. Lloyd Doggett, D-Texas, citing a 1995 quote from former Republican House Speaker Newt Gingrich.

“It would be a serious mistake that we have to resist at every opportunity,” Doggett continued.

Potential cuts to Medicare have been dragged back into the spotlight by the 2024 presidential election, after Republican presidential candidate Donald Trump said he would consider cutting Medicare and other entitlement programs if elected. President Joe Biden has presented himself as a defender of Medicare, pitching a plan last year to keep Medicare’s hospital trust fund solvent beyond 2050 without cutting benefits. The plan would further reduce what Medicare pays for prescription drugs and raise taxes on Americans earning over $400,000.

There has been no concrete movement in Congress on the proposal, though raising taxes on high-earning Americans has popped up in previous bills introduced in the House and Senate over the past few years.

If enacted, Biden’s plan would create enough additional revenue to “make the HI trust fund solvent indefinitely,” Spitalnic said.

Lawmakers on Thursday stressed the need to find middle ground, with Budget Committee Chair Jodey Arrington, R-Texas, suggesting the House form a bipartisan commission to discuss different Medicare reforms. Earlier this year, the committee advanced a bill to create such a fiscal commission, though it has yet to be taken up by the full House. Arrington has previously said he plans to attach the proposal to other spending bills.

“I bet if you randomly selected 10 high school students from around the country and you gave them the same set of considerations and reform ideas, I bet they could come up with a consensus solution that most Americans would accept … The question is then, why can’t thoughtful leaders who are elected by the people?” Arrington said.