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Press Release

Medicare's Two Fundamental Problems


July 16, 2003

The Honorable Dennis Hastert
Speaker of the House of Representatives

The Honorable Bill Frist
Senate Majority Leader

The United States Capitol
Washington, DC 20515

Dear Speaker Hastert and Majority Leader Frist:

Over the next weeks and months the Congress faces a decision that will ultimately be ranked not by the short-term political benefits but rather by the judgment of history. After years of debate, political posturing, and gridlock, both the House and Senate have passed legislation to add a new prescription drug benefit to Medicare. The conference committee on this legislation is the last opportunity – most likely for years to come – to fix the broken Medicare system.

The system faces two fundamental and related problems. First, the one-size-fits-all healthcare delivery system run by the government has developed into an incredibly inefficient and inflexible way for seniors to receive and doctors and hospital to deliver needed care. The senior population in America is the most diverse in the world. The diversity begins with age. While Medicare coverage begins at age 65, the fastest growing segment of the population is the over-80 segment. The healthcare needs of a 65 year old and 85 year old differ dramatically. American seniors, however, differ not only by age but also race, ethnicity, culture, and geographic region (with different healthcare systems). The current Medicare system attempts to cram all seniors into a centrally planned system. As our senior population becomes more diverse and medical care changes and advances, the more outdated and unfair to seniors the system becomes.

The second crisis of course is financial. The un-funded liabilities of the Medicare system in its current form are staggering and must be dealt with. As the baby boom population begins to reach Medicare eligible age (2010) the costs to both Part A and Part B will begin to sky-rocket and force the Congress to attempt to impose cost-controls on a system already beginning to deliver inadequate care to our diverse senior population.

The Congress must address both of these problems in any Medicare legislation. With the baby boomers retiring in less than a decade, the upcoming conference committee on Medicare reform represents the last opportunity to address the fundamental problems of the Medicare system.

The legislation passed by the United States Senate does not address either of the two fundamental problems facing Medicare. In fact, the legislation makes both problems worse by greatly adding to the financial burdens of Medicare without offering seniors any alternatives. Therefore, while conference committees often involve compromises between legislative differences, given the historical importance of this particular legislation, the Medicare conference committee should reject the Senate approach.

The legislation passed by the House of Representatives in dramatic fashion contains some elements of reform and can be the basis for the conference committee to begin its work. The fundamental flaw in the House approach is the delayed timetable for Medicare reform. The timetable for new prescription drug benefits must be tied to the timetable for reforms. If new benefits are scheduled to go into effect before serious reforms, the probability is that those reforms will never be implemented. Additionally, the House legislation does not contain long-term cost containment that ensures the financial stability of the Medicare program. Given the added new financial burden of the prescription drug benefit, the necessity of long-term cost containment becomes that much more important to include in any Medicare reform legislation.

Citizens for a Sound Economy opposed both the House and Senate versions of the Medicare prescription drug legislation. Our organization’s mission is to fight for less government, lower taxes and more freedom. We do not believe either version of the legislation was compatible with our mission and principles. We do, however, hope the conference committee produces legislation that adequately addresses Medicare’s two major problems and that our organization can support. This is an important and unique moment and any legislation that fails to address Medicare’s major problems should not become law.

You face the complicated challenge of not only getting the policy right, but also of gathering the votes to pass the legislation. But given the importance of Medicare, the enormity of the fiscal problem, the aging of the baby boom generation and rapid advances in medical care, only history will be the judge of whether this Congress met the challenge. If it takes more time to get the policy right to get the needed votes, it is worth the wait. CSE stands ready to help in any way we can to enact good policy.


Paul Beckner
Citizens for a Sound Economy