But the biggest change is the Affordable Care Act, which has created an enormous agenda for the health policy community, and which promises to generate information that will help the nation decide whether something like premium support is a good idea.
TL: What sort of information?
HA: The key to the success of premium support is the effective regulation of insurance offerings in a way that allows some very vulnerable people to choose intelligently among competing plans and the efficient provision of subsidies. The Affordable Care Act is setting up health insurance exchanges to just that for roughly twenty-nine million people. The population to be served under the Affordable Care Act is much easier to deal with than the Medicare population. It is less frail and it is much smaller than the fifty million who are now in Medicare. Yet states are having real problems fielding the exchanges, and we don’t know how we are going to get them up and running by 2014. It’s close to wacky to repeal the exchanges called for by the Affordable Care Act, which will serve twenty-nine million comparatively healthy people, and then in the next breath propose to create something like them for close to fifty million people who are much sicker and frailer.
TL: What are some of the other factors that are bringing vouchers back to the national agenda?
HA: Everyone has been persuaded that the nation faces a long-term deficit problem. Making sure Medicare spending doesn’t rise too much is being pushed by people who care more about the deficit than protecting access to health care by vulnerable populations.
TL: Does Medicare have a cost problem?
HA: Absolutely. The number of Medicare enrollees is going up and is projected to rise faster than incomes.
TL: Don’t official projections show a slowdown?
HA: Yes, they do. Official projections assume continuation of the limits enacted several years ago on payments to physicians. But Congress is not likely to stick to those limits. One force slowing down spending is real but temporary. As baby boomers retire, the age of the Medicare population is falling, and that holds down costs per person. Of course, those baby boomers will grow older, and as they do the per beneficiary costs will rise.
TL: So then Medicare does have a cost problem over the long haul. Is the Hospital Trust Fund, which pays seniors’ hospital bills, adequately funded?
HA: No. It’s projected to be exhausted in 2024. But action will be needed before then to avoid that outcome. But there is a bit of a Perils of Pauline character to watching the Hospital Trust Fund. In the past, projections have indicated that it would be exhausted in as little as two years. Each time, Congress has stepped in to make changes that prevent that outcome.
TL: What has Congress done to make sure that doesn’t happen?
HA: It has injected revenues from taxation of Social Security benefits. It has reformed payments. It has shifted costs from the Hospital Trust Fund to other parts of Medicare. It has increased payroll taxes, and tightened enforcement to avoid fraud.
TL: What is the long-term solution?
HA: I think it takes a lot of things. It takes more enforcement dollars, as there is still a lot of fraud. It takes administrative dollars, so that Medicare can make sure that physicians and hospitals follow established guidelines for delivery of care. It takes more payments, in premiums or cost sharing, by those who can afford them. It takes reform of the supplemental coverage that most people have so that this coverage does not shift costs to Medicare. And even after all of those measures, it will also take higher taxes.
Current payroll tax revenues, which fund hospital care, cannot possibly pay for the flood of Baby Boomer beneficiaries. There’s no way to provide standard benefits for the tens of millions who will become eligible for benefits in the next few years without raising payroll taxes and general revenues for Part B (medical benefits). Just now, few are willing to acknowledge that we are going to have to raise taxes or that we should actually spend more on administration.
TL: Will more means testing in the program—that is, making those with more income pay more for their Part B and Part D benefits—make much of a dent?
HA: Well, technically speaking, we don’t have means testing, which means denying benefits to people with more than a certain amount of income or assets. But those with comparatively high incomes have to pay extra for benefits. And there is somewhat more room for such charges. But not a lot, since only a small proportion of the elderly and disabled can pay much more than they do now for health care without suffering genuine hardship.