Nation's debt threatens economy, health care security

December 1, 2011

By JUDITH VANDEWATER

WASHINGTON — Getting control of the mounting federal debt is critical to the economic well-being of Americans and the security of the nation, Sen. Kent Conrad, D-N.D., told the audience of ministry advocates and government relations specialists gathered at CHA's Catholic Legislative Advocacy Conference here.

Conrad chairs the powerful Senate Budget Committee and is a long-standing member of the Senate finance committee, which has jurisdiction over tax, trade and health care entitlements — Medicare and Medicaid. A self-described deficit hawk, Conrad said that spending is at a 60-year high in the U.S. and relative tax revenues are at a 60-year low as a share of gross national product. He favors spending cuts twinned with revenue increases to restore balance to the federal budget.

"Our country's in trouble," he said during his Nov. 3 address. "We are currently borrowing 40 cents of every dollar that we spend. That is not sustainable, and it is going to have to change. The fastest growing accounts are the health care accounts, in defense and interest on the debt." At the existing level of debt, the country's future economic growth prospects are greatly diminished, he said, and economic prospects are even gloomier in the out years.

Currently the U.S. debt is roughly equal to the country's annual gross domestic product, Conrad said. The Congression-al Budget Office projects that, given the

current spending trend line, by 2037 federal debt will be two times GDP. "That cannot be allowed to happen," Conrad said.

Health care spending is a significant contributor to U.S. spending. Public and private health care spending combined claim one in every six dollars in the economy. Unless the trend lines can be bent, health care inflation together with the increased health care demands of an aging population will claim one in every three dollars in the economy by 2050, he said.

"Logic tells me you have to deal on the revenue side of the equation … and you have to deal on the spending side of the equation," to get control of the federal deficit, Conrad said. "We have to insist that those who have benefited the most from this economy over the past 20 years be asked to pay more. And we have to fundamentally change our entitlement programs because the demographics are clear, the number of people who are eligible (for entitlements) will double in the next decade and we can't pay the bills now. To me it's time to face reality and do it in a fair and balanced way and get our country back on track.

"The sooner we take action, the less draconian the solutions are going to have to be," he said.

Medicare and Medicaid
Experts expect Medicare and Medicaid will be under continuing fiscal pressure for the foreseeable future from politicians determined to reign in growth in entitlement spending.

"One of the largest factors behind the grim long-term budget forecast is the rising cost of Medicare and Medicaid," said Robert Greenstein, founder and leader of the Center on Budget and Policy Priorities, a nonpartisan research and policy institute. Greenstein said a key to addressing future budget shortfalls and potentially crushing federal debt is to slow the growth of the U.S. health care spending. Citing prominent economists, Greenstein said that there are limits to how much Medicare and Medicaid cost growth can be slowed through program cuts without cost reductions in the overall health system.

Greenstein and other speakers at the two-day meeting noted that the most important determinant of the future shape of Medicare and Medicaid will be whether or not Congress is willing to approach long-term deficit reduction with a balance of spending cuts and revenue increases. Without additional revenue, Greenstein said he would expect Medicaid to be converted from an insurance entitlement to a state block grant program. That change is favored by some House Republicans who also have called for Medicare to be replaced with a voucher system that beneficiaries would use to purchase insurance in the private market.

Greenstein said budget approaches like Republican presidential hopeful Mitt Romney's proposal to cap federal spending at 20 percent of the overall economy are too rigid to give policy makers the ability to respond to shifting priorities. The future costs and benefits of medical breakthroughs, combatting an epidemic or meeting domestic security demands can't always be neatly anticipated, he said.

Medicare age eligibility
Cybele Bjorklund, staff director of the House Ways and Means Committee health subcommittee, said that the Congressional Budget Office has determined that a proposal being floated to raise the Medicare eligibility age to 67 from 65 is more of a cost shift than a cost fix. Many seniors in the gap years would remain on Medicaid coverage or retain more costly employment-based insurance, but others would be dependent on the private insurance market for individual coverage. If policy makers do raise the eligibility age despite the added costs to the health care system overall, she believes it would be folly to do so before the Patient Protection and Affordable Care Act is on firm ground and the health care exchanges it engendered are operational.

The exchanges will offer competitive private insurance products without prejudice to people with preexisting health conditions, and they will cap the age-related premium bump to three times the amount paid by younger policyholders. In the absence of those exchanges, seniors not eligible for Medicare and purchasing care in the individual health insurance market may not be able to find or afford health care coverage, she said.

Super committee's ax
As Catholic Health World went to press, the bipartisan Joint Select Committee on Deficit Reduction, or super committee as it is widely known, had less than a week to go before its Nov. 23 reporting deadline. The bicameral committee of 12 was created as part of a compromise agreement to break the summer's partisan impasse over raising the federal debt ceiling. The committee was tasked with cutting a minimum of $1.2 trillion from federal spending over 10 years. The agreement establishing the committee requires Congress to consider and approve the committee's recommendations without amendment, and to do so by Christmas. If simple majorities of both houses fail to accept the committee's recommendations with respect to revenues and spending, predetermined automatic budget cuts known as the "sequester" must be put into place.

The sequester requirement exposes Medicare to a 2 percent across-the-board cut, or $123 billion in provider payment cuts, but it leaves alone Social Security, Medicaid and the State Children's Health Insurance Program. Just how untouchable the $900 billion in automatic sequester cuts will prove to be remains to be seen. Early in November Pentagon supporters were working to protect the military from $500 billion in sequester cuts.

The super committee's deliberations have been closed to the public, but several speakers at the CHA meeting said the committee was expected to consider how to rein in spending on "dual eligibles," the frail, low-income seniors who qualify for both Medicare and Medicaid coverage. Josh Trent, a health care policy advisor for Sen. Tom Coburn, R-Okla., said there has been much talk in Washington about improving care coordination along the continuum of care to save money and improve care quality for this vulnerable group.

The Affordable Care Act funds demonstration projects with this goal, but since those projects are years from showing results, it is not known how the committee might approach this issue.

Trent said Medicare is built on an unsustainable financial model — the average beneficiary pays in $120,000 over their life and claims $300,000 to $350,000 in benefits. The Medicaid fee schedule is so low that 40 percent of physicians and up to 70 percent of specialists don't see patients with Medicaid coverage, he said. The program's cost to states though is significant, claiming up to a quarter of a state's budget and crowding out other things like transportation expenditures, he said.

"For folks who are low income and really depend on Medicaid, we need to have compassionate courage to reform the program and make sure it works for them," Trent said. "Right now they have access problems. We need to make sure it works for the most vulnerable."

Greenstein said 2013 promises to be a tumultuous year in the annals of budget balancing and for the federal health insurance programs, particularly Medicaid. He said that it is important to begin educating the American public now on the critical role Medicaid plays in the nation's safety net "and what kind of a country we would be without it. We haven't really done that since the program was created. Hopefully this is something we can all work together on in the interest of people whose health quality we all want to preserve and protect," he said.

Lindsey Artola, chair of the CHA board's advocacy committee, said that as Congress works to reduce federal debt, it is important for ministry members to remind their congressional representatives that it is unacceptable to balance the budget on the backs of the poor and the vulnerable. Artola is Provena Health – Resurrection Health Care's system executive for advocacy and development.

 

Copyright © 2011 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.