Medicare politics could cost cities

Medicare’s financial woes are making a lot of local officials sick. They are concerned that if the matter is not resolved properly, municipalities will have less money for nuts and bolts issues like housing, education and welfare.

“No serious deficit reduction can occur without focusing on entitlement spending,” says Columbus, Ohio, Mayor Greg Lashutka, who is also president of the National League of Cities. He says Congress is focusing expected future cuts on programs that people need to survive when the at, tension should be on the most costly and the most unnecessary.

Medicare spending, as a percentage of Gross Domestic Product (GDP), currently is 2.7 percent. The cost of the program, which provides health care to the nation’s elderly, is going up about 11 percent a year. At that rate, the fund will be broke by 2002. If nobody in Congress can muster the courage to fix the problem, Medicare will consume the entire federal budget by the year 2030.

But political posturing and election-year rhetoric make it unlikely that any meaningful action will be taken until the presidential race is decided in November.

In the latest round of negotiations, Republican leaders have lowered the amount of their proposed cuts in the future growth of Medicare from $270 billion over seven years to $168 billion, while President Clinton has increased the amount of his pro, posed cuts from $110 billion to $124 billion. As a percentage of GDP, the Republicans would reduce total spending to 2.6 percent this year and 7.8 percent by the year 2030. That is not enough, according to some observers.

“Even if the Republican plan passed in its original version ($270 billion cuts), we’d be back at trying to solve this problem in three or four years,” says Richard Jackson, an analyst with the bipartisan Concord Coalition, a Washington group devoted solely to studying ways to balance the federal budget.

Jackson says some of the assumptions underlying both plans are too optimistic. By far the largest cuts in the future spending of Medicare would come from whittling the fees paid to doctors and hospitals. Those providers will then just multiply the number of services they offer, he insists.

House Ways and Means Chairman Bill Archer (A-Texas), who is overseeing Medicare reform in the House, disagrees with the premise that providers will suffer. The Republican proposal, he says, applies market-based solutions, such as medical savings accounts and managed care programs, that decrease health care costs and distribute those reductions fairly.

Such private options would cut about $31 billion over seven years from Medicare’s cost, if, as Republicans assume, 24 percent of all Medicare beneficiaries are enrolled in one of these programs by 2002.

That too, is wishful thinking, says Jack, son, because enrollees will not be penalized for staying in the current system. The Washington-based National Center for Policy Analysis disagrees, predicting that within five years, 80 percent to 90 percent of the retirees would be in one of the private sector options. Still, getting those market-based solutions to work is one thing; getting them enacted is another.

Congress, which has not shown much inclination to enact any meaningful re forms that would affect lobbyists, is not likely to fend off powerful special interests like the elderly, labor and the providers. And the president is painting the “heartless Republicans” picture in an attempt to placate elderly voters, whose support he desperately needs.

Ultimately, though, cities and counties will pay the price if the political battles continue, and there is no reform.