February 24, 2005
A Budget Problem No One Wants To Face

By Steve Chapman

The looming financial crunch in Social Security presents options that bring to mind the entrees at a prison cafeteria: Some are inedible, and some are worse. The available ideas include such appetizing possibilities as raising taxes, reducing future benefits and increasing the retirement age. And the really bad news? Social Security is not the tough problem. It's the easy one.

The tough one is Medicare. Amid the hoopla over how to support baby boomers in their old age, no one is paying attention to how to finance their hospital and doctor bills. But in almost every way, the challenges of Medicare are bigger and more complicated than those of Social Security. Instead of taking steps to contain the fire before it gets out of control, though, Congress and the president are spraying it with gasoline.

The accelerant comes in the form of the 2003 prescription drug benefit, which will take full effect next year and has already become more expensive than Americans were led to believe. Over the next 10 years, the tab is expected to reach $724 billion, far higher than the $395 billion advertised back then -- or even the $551 billion that the administration's secret internal estimates predicted. It turns out that the original 10-year cost projection really covered just eight years, since the benefit was not available for the first two years.

It would be dubious enough to add a huge new entitlement in the best of times. But for Medicare, the best of times are long past. A recent article by David Nather and Rebecca Adams in the journal CQ Weekly notes that "Medicare's spending is growing faster than Social Security's, and its reserves are expected to run out sooner." In 20 years, Medicare will most likely cost more than Social Security, and it will keep growing.

To congressional budget-writers, the Social Security gap resembles the Grand Canyon. But the distance between Medicare's income and outgo looks more like the Atlantic Ocean. Over the next 75 years, Social Security faces a deficit of $3.7 trillion. The shortfall for Medicare is $27.8 trillion -- more than seven times larger.

What needs to be done, it may not surprise you to learn, is the opposite of what is actually being done. President Bush is the first president since John Quincy Adams to serve a full term without vetoing a single bill. But recently, Bush threatened to take his club out of the closet -- not to cut spending but to increase it.

The veto threat came in response to complaints about the swelling cost of the prescription drug benefit. Some Republicans think it should be cut to fit under the original spending target. Bush, using phrases that could have been borrowed from Ted Kennedy, declared, "I signed Medicare reform proudly, and any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto."

But Kennedy wouldn't say that, because Kennedy was among the many Democrats who opposed the prescription drug measure as too stingy. The senior senator from Massachusetts, at his most charitable, once referred to it as merely a "down payment" toward the kind of program we need. When it comes to Medicare, fiscal irresponsibility offers a rare example of harmonious bipartisanship.

The prescription drug bill was a perfect example of how Washington gets itself into budget trouble -- by handing out treats today and putting off payment until tomorrow. Fixing the problem requires Congress and the president to inflict pain now for a reward that is years or decades away, which is why no one in Washington is paying much attention. By the time Medicare becomes unaffordable, after all, most of the people in Congress will be out of office and possibly residing in the next world, safe from the vengeance of voters.

At that point, though, drastic changes will be in order -- none of them particularly enticing. One is to impose higher deductibles and co-payments on seniors, or to deny coverage for certain ailments, which would cause hardship. Another is to lower reimbursements for physicians and hospitals, which might induce some of them to stop treating Medicare patients. Another is to raise taxes on today's workers, who are already carrying a heavy payroll tax load, and who may have to ante up for Social Security as well.

Given the magnitude of the challenge, it might be understandable for our leaders to crawl under their desks and curl up in the fetal position, moaning and weeping and hoping the problem will go away. Which, as it happens, is about what they're doing.

2005 Creators Syndicate

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