Coburn’s cuts: Taking on Medicare and Medicaid

August 14, 2011

Editor’s note: Sen. Tom Coburn (R-Okla.) released a plan in July that he said would achieve $9 trillion in deficit savings over the next decade. Here, we review parts of the proposal.

Coburn, a doctor, has some strong ideas about Medicare and Medicaid, which, he said, provide “health-care coverage for approximately one in five Americans and, along with Social Security, make up the backbone of the federal safety net.”

Among his proposals: raising the entry age for Medicare; means-testing beneficiary payments; raising some premiums for all seniors; increasing funding for investigating fraud and abuse of both systems; and freezing for 10 years the Medicare reimbursement rates for doctors.

Why such dramatic steps? Coburn agrees with the Congressional Budget Office that the dramatic growth of federal spending on health care is “the single greatest threat to budget stability.”

“Medicare and Medicaid consume one in five federal tax dollars,” according to Coburn, who adds, “Taxpayers lose an estimated $100 billion a year to waste, fraud and abuse in the two programs, which is the combined annual budget of three entire federal departments — Transportation, Homeland Security, and Housing and Urban Development.”


U.S. Sen. Tom Coburn, R-Okla. (Mark Wilson/GETTY IMAGES)

Coburn believes that the federal safety net for seniors should reflect that Americans are living longer than when the laws were enacted. He notes that when Medicare was passed in 1965, the average U.S. life span was 70.2 years, and today it is 77.9 years. For someone born in 2009, it’s expected to be 78.2.

That’s “a wonderful development,” he said, but adds, the increase “has significantly raised the costs of the overall program.” He wants to increase the Medicare eligibility age by two months every year. The starting point would be those born in 1949, who will be 65 in 2014, and go until the eligibility age hits 67. Those born in 1960 will be 67 in 2027. After that, eligibility would be indexed to life expectancy, rising a month every two years and reaching 69 by 2080.

That still would have the average person on Medicare for at least 10 years, double the coverage time expected when Medicare first passed. Such a change could save $124 billion, according to Coburn.

Coburn also suggests targeting Medicare assistance “to those who need it most.”

First, he knocks down the notion that its payroll tax funds the program. He shows that it covers only hospital expenses (Part A). Medicare premiums cover only 25 percent of doctor visits and treatments (Part B). The rest is “subsidized through general revenue tax dollars,” Coburn said.

Premiums in 2010 paid for 11 percent of the Medicare drug program (Part D) that passed during the George W. Bush administration; general tax revenue paid 83 percent. Through 2010, the program overall cost $214 billion.

Coburn says individuals making $150,000 or couples with incomes of $300,000 “should pay the full cost of their Medicare Part B and D coverage,” a step he said would save $21 billion over 10 years.

His most controversial proposal is to raise Medicare Part B premiums for everyone by 2 percent for the next five years so that they cover 35 percent of the overall program.

Coburn notes that when the measure was passed, premiums were to cover 50 percent of all costs, but they never rose above 25 percent. He projects the average cost for his increase would be $15 to $20 a month and implementation would save more than $241 billion over the next 10 years.

Another big saving could come from increasing oversight of both Medicare and Medicaid, where losses from fraud are estimated by analysts and law enforcement officials to run from 3 percent to 10 percent of health-care expenditures. That, Coburn says, could be about $230 billion “fraudulently diverted” from the $2.3 trillion system.

He noted that at a recent House hearing the deputy inspector general of the Department of Health and Human Services (HHS) said that public health-care programs are “attractive to organized crime because the penalties — if they are apprehended — are lower than penalties for many other criminal offenses.” His answer is to beef up investigations because every $1 given the HHS inspector general returns almost seven times that amount in fines or money saved.

On Medicaid, Coburn wants to transfer management authority from Washington, making the states responsible for providing care for certain populations but leaving them the flexibility to negotiate with providers and design benefit packages.

Coburn wants to create stability in the Medicare reimbursement fees to doctors, which are annually threatened with reductions as the cost of the program increases. It’s to meet that threat, which Congress regularly defers, that he wants the 10-year freeze on reinbursement levels. That step, Coburn said, would ensure “stability and predictability for physicians, enabling seniors to continue to access the care they need.”

Walter Pincus reports on intelligence, defense and foreign policy for The Washingon Post. He first came to the paper in 1966 and has covered numerous subjects, including nuclear weapons and arms control, politics and congressional investigations. He was among Post reporters awarded the 2002 Pulitzer Prize for national reporting.
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