Expect key American entitlements — Medicare, Medicaid and Social Security — to be on the chopping block in Congress this year. There is a pressing need to free up resources for the federal budget to support its infrastructure initiative to improve bridges, roads, dams and tunnels.
However, while tax reform just reduced the largest financial obligation Americans have to the U.S. government, entitlements represent a reciprocal social contract the government has with its citizens. Sparks will fly.
The future of Medicare, Medicaid and Social Security is currently deemed unsustainable. Why? As baby boomers age and fertility rates drop, the pace of continuing contributions cannot keep up with escalating payouts. In addition, there is an escalating cost of care from cutting-edge medical treatments. Finally, under Obamacare, over 20 million more Americans are now in the system.
Other than entitlements, there are few options for infrastructure funding. The budget has already been scoured to cut costs such as the Children’s Health Insurance Program, to limit the expanded debt ceiling to $1.5 trillion over 10 years, all terms of the tax reform bill.
How big is the elephant in the room? While the national debt is approaching $21 trillion, unfunded liabilities of Medicare and Social Security amount to an additional $80 trillion.
The total federal budget is just over $4 trillion. Of that, mandatory spending is $2.5 trillion. Social Security is by far the biggest expense, at $1 trillion. Medicare is next, at $580 billion, followed by Medicaid at $400 billion. In contrast, defense is $827 billion annually. Speaker of the House Paul Ryan is adamant that any bill for infrastructure must occur concurrently with entitlement reform.
Tucked into the tax reform bill was a reversal of the health care mandate, central to Obamacare. By removing the IRS penalty for not having coverage, it alleviates government responsibility to reimburse carriers for higher-risk populations. But those who opt out don’t realize that one still feels fine initially with high blood pressure, high cholesterol, diabetes and early cancer. When you finally feel bad, damage has been done not only to the health of the individual but to the global cost of health care.
Paradoxically, withdrawal of the health care mandate means more U.S. citizens will receive coverage from government sources including Medicare and the VA, but especially Medicaid and, in Hawaii, Quest. Also, as a result, for those who pay for health insurance, premiums are pushed up.
This week, I participated in the State of Reform Health Policy Conference in Seattle, which brings together senior health care leaders and policy makers.
John Kitzhaber, former Oregon governor and a former emergency room physician, recommended focusing not on budget cuts but the 20 to 25 percent waste in the system. “It is far better to gain savings by changing the care model. The key is to create value.”
Kitzhaber describes the social determinants of health as a prime place to invest. That means treating homelessness as a health problem and addressing associated housing, mental health and substance abuse issues. “Health is the first rung on the ladder of opportunity so there needs to be a floor to access basic services, and it can’t include everything,” the former governor said.
It may well be a necessary to trim entitlements in 2018, but there are smarter ways to improve the quality of life in American society.
Ira “Kawika” Zunin, MD, MPH, MBA, is a practicing physician. He is medical director of Manakai O Malama Integrative Healthcare Group and Rehabilitation Center and CEO of Global Advisory Services Inc. Please submit your questions to info@manakaiomalama.com.
