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Social Security

Rescue Attempt May Leave Gaps in the Safety Net

By Spencer Rich
Washington Post Staff Writer
Sunday, May 28, 1995; Page A01

Loretta Adkins, a 79-year-old widow from Marlow Heights, spent a lifetime playing by the rules. But these days she is afraid that Congress is about to change the rules in ways that could take away her doctors or plunge her into financial ruin.

"I don't know what in the world seniors will do," she said, if Medicare, the federal health insurance program for the elderly, were to cut its benefits, require her to pay more or drastically alter the way she sees her doctors, gets prescriptions, even how she pays for her walker. All those changes are now being contemplated to deal with Medicare's deep financial problems.

Adkins's only income is $1,100 a month in widow's benefits from Social Security, plus a pension of $59 a month from Hecht's, where she sold shoes for 24 years. She has had thyroid problems, cataract surgery, hip replacements and other medical bills – all of which have been paid by Medicare. Government-financed health care, she believes, is her legal right, not some privilege that can be given and taken back.

"I did my part. I raised my children. I didn't go on welfare to raise them; I went to the Hecht Company and worked like a dog," Adkins said.

Convincing Adkins and the other 33 million Americans age 65 and over that things must change has become one of the greatest political challenges facing the Republican leadership in Congress this year. The GOP's plans to balance the budget encompass sharp reductions in growth of three major programs for the elderly: Medicare, which provides health insurance for about 37 million elderly Americans; Medicaid, the health insurance program for some of the country's poor and disabled, which pays the bills for 1.6 million elderly people in nursing homes; and Supplemental Security Income, which offers cash assistance to the elderly poor.

Each of the programs poses unique challenges to congressional budget hawks, but all three are growing fast and are projected to keep growing for years because Americans are living longer and because they are getting more extensive and more expensive health care as they age.

Given those trends, this year's budget battles over benefits for the elderly are a mere preview for the upcoming war over Social Security, the largest federal program of them all. Thirty Years Ago, a Promise Bringing down spending in any of these programs is difficult because the elderly not only depend on them, but consider them benefits earned earlier in life. And any changes in the programs are invariably seen in apocalyptic terms. Listen to two of Adkins's friends in their Marlow Heights neighborhood:

"If they took Medicare and Social Security away, they might as well take me too," said Pauline Armes, 72, a widow whose annual income totals about $7,800; who has high blood pressure, asthma and other ills; and who can "barely get along" on the income that's left after she pays for medicine and other essentials.

"We worked all our life, and then you get old enough to enjoy it a bit and it's taken away from you and you have nothing. I don't think it's fair," said Charlotte McChesney, 75, whose total annual income is $11,400 from Social Security.

These women did not invent their claims on the federal treasury. Thirty years ago, they, like all other Americans, received a solemn promise from their government that they would have health insurance to see them through their old age, not as charity but as a right.

"No longer will older Americans be denied the healing miracle of modern medicine," declared President Lyndon B. Johnson on July 30, 1965, as he signed the bill creating Medicare.

The program has achieved its aim. Nearly all Americans 65 or over are enrolled in Medicare, while only half the elderly had any health insurance in 1965.

But today, despite its success and popularity, the $176 billion-a-year program is in serious danger because its costs are growing so rapidly, about 10 percent annually. Democrats and Republicans agree that the trust fund that pays hospital bills is galloping toward bankruptcy in 2002 and that total financial collapse looms not much further into the future.

Not surprisingly, Medicare is now at the center of a tremendous fight on Capitol Hill, and the only certain outcome is that the program will never be the same.

Republicans want deep cuts in Medicare growth, between $256 billion and $288 billion over the next seven years. Democrats want to block that. Nobody wants to destroy Medicare. But its funding problems could lead to drastic cutbacks in services, increased costs to the elderly, higher taxes overall or some combination of all three.

Medicare faces such searing problems for two major reasons: Health care costs are growing rapidly because of improved but expensive life-enhancing scientific developments. And, the program faces a demographic revolution when the huge Baby Boom generation retires. The population 65 and over will increase from 33 million today (13 percent of Americans) to an estimated 70 million in 2030 (20 percent).

The same demographic revolution raises a host of other social problems as well. Social Security, from which three-fifths of the elderly get at least half their cash income, is in much better financial condition than Medicare, but it faces insolvency in 2030. Welfare programs for the elderly, as well as the cost of nursing-home care and home care, will also face enormously greater burdens as the number of aged grows.

The coming crisis is not just financial and demographic. For most of the 20th century the United States has defined itself politically through debates over the size of the federal government and the extent to which that government looks after its most vulnerable citizens. This summer the focal point of that debate will be the size of government expenditures on the aged, but the elderly are not by any means the only part of the population with a big stake in the outcome.

Michael Tsapakos, 39, a physician at Walter Reed Army Medical Center, is one of the many millions of middle-aged Americans who have come to depend on Medicare in an important but indirect way. All through the years he was a medical student, hospital intern and resident, with a salary barely enough to live on, a baby on the way and mountainous school debts, he could not help his parents when they got hit with big medical bills.

"I was happy they had Medicare," he said with evident relief in his voice.

Since he started to practice medicine a year ago, his financial situation has improved. "Of course I will help them," Tsapakos said. But both his parents have had several of the serious medical problems that sometimes strike the aged, so even now Medicare serves as an important safety net. Like many people of his generation, Tsapakos is watching what Congress does with programs for the elderly, knowing he may be obliged to pick up the slack.

Both political parties are trying to present themselves as the program's best friend for fear of retaliation by elderly voters and their children.

Republicans say they want to cut program growth to save Medicare. Their proposals to achieve savings include paying hospitals and doctors less than they need to keep pace with inflationary increases in their costs.

Other proposals they favor would shift costs from the government to the pockets of enrollees by raising the eligibility age from 65 to 67 and sharply increasing premiums, deductibles and co-payments that beneficiaries pay, or by applying an income test to the program.

Yet another GOP option would give people a government-funded voucher each year for a fixed amount of money, which they could then use to buy their own health insurance on the private market.

Democrats do not deny the financial problems of Medicare, but they attack the GOP proposals as "too much, too quick." They argue that the proposals would greatly reduce the availability of hospital care in rural areas and inner cities and would eventually shift too much of the costs to people who simply can't afford to pay. Despite greedy geezer tales, 42 percent of the households headed by Americans aged 65 or older have incomes of less than $15,000 a year. The Crunch of the Boomers In the long run, resolving the Medicare financing problem will eventually come down to a decision on just how much society is willing to pay for the care of the elderly. And the crunch will come once the Baby Boomers get old, in the first quarter of the next century.

Then, according to many experts, the government will face a stark choice between decimating benefits or raising taxes. That is an idea no politicians seem willing to suggest publicly while the crisis is still decades away and the nation is in an anti-tax mood.

Holding the growth of expenditures alone will not save the program in the long run, said economist Robert Reischauer, a former Congressional Budget Office director now at the Brookings Institution. "Therefore we will have to turn to increased taxes or increased premiums on beneficiaries to meet the demographic challenge," he said.

Several GOP leaders, such as House Ways and Means Medicare subcommittee Chairman Bill Thomas (R-Calif.) and Sen. Judd Gregg (R-N.H.), contend that the Republican proposals could greatly reduce the growth of Medicare costs without harming benefits.

With vouchers, the theory is that competition among private health plans to sell policies to Medicare enrollees will drive such plans to improve efficiency and cut their costs.

Another high hope among Republican lawmakers is that people will enroll in health maintenance organizations, which provide medical services for a fixed annual fee. Because they are not paid more for each added treatment (as doctors are under Medicare's current fee-for-service structure), the theory runs, HMOs have no incentive to pile on extra tests and the like. Instead, they save money by carefully monitoring waste, reducing needless hospitalizations and bargaining down fees.

Supporters argue that these measures could save Medicare because the costs of private health plan premiums – and particularly those of HMOs – have not been going up nearly as quickly as Medicare costs have.

But like many plans to improve the efficiency of government entitlement programs, these proposals would require major changes in behavior by millions of Americans. In this case, elderly people who have grown accustomed to picking their own doctors and having the government pay the bill would have to join HMOs that offer much fewer choices.

Michael Tsapakos is certain his parents would not like to join an HMO, in part because they had the same physician for 40 years. That doctor became such a family fixture before he died that Tsapakos said, "He inspired me to become a physician."

"I never went in for that," Charlotte McChesney said of joining an HMO. "You get used to your own doctor. It takes time to be confident in them. It's just like a best friend. I wouldn't like to be forced."

The question is whether vouchers, lower payments to hospitals and doctors, and some higher payments by beneficiaries can save the program financially without converting it into a bare-bones shell that offers the elderly minimal protection.

If not, then the nation will be faced with a crucial judgment. How much does it want to spend on health care for the elderly? And should part of this come from higher taxes to pay for the millions of extra Baby Boomers?

© Copyright 1995 The Washington Post Company

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