Congress's Sad Retreat On Medicare

Faced with a rare opportunity to dramatically improve the precarious future prospects of Medicare, Congress ducked. Senate and House conference negotiators recently announced that the Senate provision to gradually raise the eligibility age from 65 to 67 was dropped from the budget reconciliation bill. The plan, which would have been phased in over the next 30 years and would not have affected current retirees, is intended to conform Medicare's eligibility age with that of Social Security. This failure of Congress, once again, to implement fundamental reform of Medicare makes one wonder if lawmakers aren't placing their own political future above the future of Medicare and younger generations.

The impending retirement of the baby boom generation will explode the costs of Medicare. Currently, the program's unfunded liabilities are $2.9 trillion. If nothing is done, it will explode by 34 percent to $3.9 trillion in 10 years. According to some projections, Medicare spending is growing so fast that it could very well be the largest single item in the federal budget in 2010. The potential costs of an unreformed Medicare will be devastating to the federal budget, taxpayers, and seniors.

The demographic situation in America justifies raising the retirement age. Americans are living longer. When Medicare began in 1965, the average life expectancy at birth was 70. In 1990, it had risen to 75. Those who reach 65 today can expect to live another 17 years, according to actuarial tables.

Congress recognized this increase in longevity in 1983, when it voted to gradually increase the retirement age for Social Security. Those very same demographics now justify raising the eligibility age for Medicare.

Making this change now will not only significantly improve the long-term outlook for Medicare, but it will also give people adequate time to plan for it. Waiting until Medicare reaches a crisis situation before making fundamental changes is inherently unfair to future retirees.

Opponents of the plan cited fears that those who retire at 65 could go without health insurance for up to two years. But this argument overlooks the fact that many people who retire at 62 to receive Social Security already go close to three years without Medicare.

Make no mistake: While reforms such as raising the retirement age may be distasteful to many, they are all but inevitable. The federal government has tinkered with Medicare about as much as it can to keep the ailing program going. Minor changes such as limiting provider payments and moving home healthcare into the general budget will only help in the short term. They will not be enough to sustain the retirement of the baby boomers.

Raising the Medicare eligibility age to conform with the normal retirement age of Social Security would have sent a strong signal that Congress is serious about Medicare reform. Budget experts have estimated that raising the retirement age to conform over time with Social Security would result in a 5 percent savings in total Medicare spending in 2025, when Medicare spending is expected to run a $1.6 trillion deficit. The Congressional Budget Office (CBO) has estimated that provisions similar to the Senate proposal could reduce Medicare's long-term imbalances by as much as 0.7 percent of GDP, thus saving billions a year.

Boosting the retirement age is by no means a "cure-all" for Medicare's problems. Much more still has to be done to ensure long-term solvency. But the bipartisan proposal by the Senate to gradually raise the retirement age was a meaningful step toward ensuring the long-term soundness of Medicare. It wasn't done to balance the budget in 2002 or give tax cuts. Perhaps it was unpopular because voting to raise the eligibility age will not win votes in an election. But it is a step toward ensuring Medicare will be there for all of us.

* Christopher Baker is a policy analyst at the National Taxpayers Union Foundation in Alexandria, Va.