THE NEXT BIG item on the domestic agenda is finding a way of either curbing or financing the big health entitlement programs. The costs of Medicare, which provides hospital and other medical insurance to almost 30 million elderly and disabled people, have been growing at an annual rate of almost 18 percent since 1970. In about five years, its trust fund, financed by payroll taxes, will be bankrupt.
To put Medicare on a sound financial basis, benefits can be cut, enrollees can pay more, taxes can be raised, or the cost and amount of medical services can be restrained. Congress has already pursued some of these options in Medicare changes made as part of last year's tax measure and the recent Social Security reform law. The most important changes seek to restrain hospital costs--the major item in the Medicare bill--by putting limits on payments to hospitals with very high or fast-growing costs and gradually shifting to fixed rates for treatment of specific diagnoses.
But these changes will not avert Medicare's financial crisis. Private insurance companies are also legitimately worried that hospitals will not restrain costs but simply shift them to patients with private insurance. If that happens, Congress will need to extend the cost-control system to non- Medicare patients as well--a practice already being pursued on an experimental basis in a few states.
Further efforts at cost control will meet strong resistance from both Medicare recipients and providers. Advocacy groups for the elderly are already lined up against administration proposals to require Medicare patients to pay more of the costs of short hospital stays in return for full coverage of catastrophic expenses. They argue that Medicare now pays for less than half of their medical bills--although most have supplemental insurance coverage either through private carriers or through the Medicaid program for those with limited incomes. And with payroll taxes already high and scheduled to rise, increases in the Medicare payroll tax should be strongly resisted.
Solving Medicare's problems--and those of the related Medicaid system--requires deciding how much the nation wants to spend on medical care and how it wants to pay for it. Americans want to be free to choose their own doctors and places of treatment. They buy the most complete insurance coverage they can afford because they do not want either their own or their doctors' decisions to be constrained by cost considerations. Small wonder then that Medicare-- even with its limited coverage--now costs almost $60 billion a year, and that three-fourths of those costs are concentrated on a small proportion of enrollees whose lives can be prolonged or improved by the very expensive treatment that high-technology medicine makes possible. Unless the country is willing to accept significant changes in these practices, it should be prepared to accept that a growing proportion of its tax and private resources will be devoted to medical care.