Reforming Medicare Before It's Too Late

The 1995-96 Medicare debate focused on the exhaustion of the Medicare Hospital Insurance (HI) Trust Fund by the year 2001 as the primary threat to the program. The Trust Fund is not the real problem. As the President suggested, that problem could be “solved: by, for example, moving coverage of home health services from the payroll-tax financed Federal Hospital Insurance (HI) Trust Fund to the general-revenue-financed Supplementary Medical Insurance (SMI) Trust Fund, or other possible fiscal legerdemain. The real and very serious problem is the long-term growth of the heavy burden on taxpayers, expecially workers, posed by the alarming growth of Medicare expenses, especially workers, posed by the alarming growth of Medicare expenses, especially after the baby boomers begin to reach age 65, about 14 year from now. That prospect makes comprehensive reform of Medicare an urgent necessity. We propose a fundamental restructuring using market forces to transform the Medicare program into an efficient and higher quality delivery system.