Better Way to Fix Medicare

The 1997 balanced-budget agreement put off Medicare's impending bankruptcy until 2008. It also called for a bipartisan commission to study the health-care program for the elderly and recommend reforms.

That commission, co-chaired by Sen. John Breaux (D) of Louisiana and Rep. Bill Thomas (R) of California, is shaping a new plan as its March 1 deadline nears.

The problem is fairly simple; solutions are not. Medicare's Part A, which pays mostly for hospital costs, is financed by payroll taxes. Like Social Security, which is on a somewhat firmer footing but also needs reform, Medicare faces the demographic challenge of the baby-boom population bulge. It is paying out more than it is taking in and will become insolvent a decade from now, if projections are accurate.

Any equation for preserving Medicare will involve tax increases, lowering of benefits, a change in how the program operates - probably all three. Senator Breaux is lining up support to convert the program to a "premium support" system. Modeled after the health-care plan the federal government provides to its own employees, the program would pay seniors a benefit to buy insurance they would select from a menu of options. Beneficiaries could expand their coverage by paying additional premiums.

The plan would also require a core-benefit package, raise the Medicare eligibility age from 65 to 67 over 24 years, and combine the current Part A premium paid by recipients with the Part B monthly premium for doctor visits. Low-income recipients would get a subsidy.

President Clinton has complicated the situation by proposing that Congress set aside 16 percent of the budget surplus over the next 15 years to pump $670 billion into Medicare. At the same time, he proposes expanding the program to pay for outpatient drug prescriptions.

Under the first proposal, in addition to the Medicare payroll tax that every employee pays, the government would take additional money out of regular income taxes to shore up the program. That's a bad precedent. It adds to the danger that Medicare would become the entitlement that ate the budget - squeezing out other needed programs for decades to come.

The prescription-drug proposal is popular with many seniors and the powerful AARP, but popularity doesn't pay bills. It's not clear how to pay for costly added benefits when the money isn't there to pay for the benefits currently offered.

Medicare can't continue on its present course. The needed changes will require sacrifice all around. The challenge is to limit the program's costs while ensuring that everyone - taxpayers, beneficiaries, providers, and insurers - is treated fairly. Senator Breaux's new approach is a step in the right direction.

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