Medicare, not Social Security, may be real 'problem child'

It's one of the maxims of Washington: The tough problems are often addressed last, while the easier ones seem to get all the attention.

That's the way it's shaping up with reforming Medicare, the problem child of America's entitlement programs for senior citizens. Next to its big brother, Social Security, Medicare is simply too difficult to handle - even though analysts agree it's the more urgent concern.

The Medicare trust fund, for instance, is expected to go bankrupt around 2012. Social Security, on the other hand, still has decades left, and isn't expected to reach insolvency until 2032.

But Medicare is far tougher to fix than the federally funded retirement program, and that's why President Clinton is revving up the political engines to "save Social Security first."

This doesn't mean Mr. Clinton has no plans for Medicare. He's asking Congress to set aside 15 percent of projected budget surpluses to gas up the trust fund that serves 39 million Americans. He says this would extend the life of Medicare to 2020.

But as a senior aide to the president admits, "it's a real long shot for anything to happen on Medicare this year, other than securing some of the surplus." The problem with Medicare reforms, the aide explains, "is they are more ambitious, complicated, and immediate than the Social Security reforms."

For one thing, the government's medical assistance for the elderly has a double burden to bear: increased medical costs combined with a growing number of older Americans. Social Security only has the demographic surge to consider.

While the overall choices for the two programs are the same (increase taxes, cut benefits, or change the system), it's the complexity of the Medicare system that almost repulses reformers. Consider, for instance, the 111,000 pages of rules and regulations for Medicare and the pricing for 7,000 different medical procedures.

THAT complexity, says Deborah Steelman, a Republican member of the government's bipartisan commission to reform Medicare, is one of the reasons that "no one likes to report on it, write about it, or talk about it."

But that is the task of the commission and its 17 members, who were appointed by Clinton and congressional leaders. They are set to issue a report advising Congress and the White House on March 1.

According to Ms. Steelman, about 10 of the members can broadly support a plan by commission chairman John Breaux, a Democratic senator from Louisiana, to have Medicare subsidize health-insurance premiums instead of its current fee-per-service system.

Under this set-up, Medicare 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 raise the Medicare eligibility age from 65 to 67 over 24 years.

Steelman predicts this plan won't go far in the short term. But that doesn't bother her, because she sees reforming Medicare as a long-term process that this Congress starts and the next president finishes.

Medicare reform, she says, is not the product of one commission report. But it's the beginning of a "second stage" in the process.

Remember the Social Security commission, she says. It split three ways, but it got lawmakers on both sides of the aisle accustomed to the word "privatization."

Steelman and other Republicans don't think much of the president's plan to bolster Medicare. Injecting new funds into the system doesn't fix the fundamental problems; it just delays the day of reckoning, they argue.

But that is the political beauty of the president's plan, say observers.

"It's great politics," says Robert Moffit, director of domestic policy at the conservative Heritage Foundation here. Clinton, he says, has managed to once again seize on an important issue, looking to be the hero for trying to save Medicare, yet doesn't plunge into battle to seriously "reform" the system.

Mr. Moffit argues that it's the same modus operandi for Social Security, in which the privatization the president emphasizes would take place mostly outside the Social Security system, through USA accounts - individual retirement accounts that would receive government contributions.

"He's not actually put forth a 'reform' plan," he says.

BUT others argue that serious reform of Medicare, which would involve the kind of changes the commission is considering, aren't necessarily the key.

A group of domestic policy experts brought together by the National Academy on an Aging Society, recently came out with a report called "Demography is Not Destiny."

They argue that other factors mean Medicare faces a "challenge" but not a "crisis." For instance, strong economic growth could improve Medicare's outlook, as would a healthier older population. Even the population projections, they suggest, vary widely and can't be counted on.

In fact, over the past 20 years or so, Medicare has been predicted to be in a much more precarious state than forecasters now see, with projections of insolvency being as near as only two years away, points out Henry Aaron, a senior fellow at the Brookings Institution here.

"We've got more breathing room today than we've had in a long time," he says. Still, he cautions, the country can't escape the underlying fundamentals that endanger Medicare: rising medical costs and an aging population.