Holtz-Eakin: Medicare Still Needs Reform

The recent slowdown of health care spending growth is one of the more positive developments in the budget over the past few years. Despite the slowdown, Doug Holtz-Eakin, former CBO director and current president of the American Action Forum, writes in The Hill that Medicare is still in need of reform to slow its cost growth. Population aging is still a significant driver of Medicare's projected spending increase, and it is difficult to say how much of the slowdown in health care costs is permanent -- one study from the Kaiser Foundation and Altarum Institute estimated that 77 percent could be attributed to the weak economy. Holtz-Eakin explains:

However, despite this good news, or perhaps because of it, it is important that we make a point to emphasize the real and continued need for Medicare reform.  Unfortunately, we’ve seen slow-downs in health care spending before, and just as quickly as they came, they have gone away.  As much as I would love to believe the trends we’ve seen in recent years will continue, and that the problem of excess costs in Medicare is over, such belief would be na├»ve.  Much of the slow-down in spending growth can be attributed to the recession, which inevitably slows spending patterns across the board.  In addition, the imminent implementation of Affordable Care Act subsidies and Medicaid expansions will further boost spending.

Moreover, if the slow-growth trend holds, Medicare is projected to add 30 million new beneficiaries in the next 20 years – which will place significant added cost pressure on the program.  This trend cannot be altered, nor avoided nor wished away.  Adding 30 million people to the program will raise the cost of program and must be dealt with.

Regardless of the interpretation of recent trends, Holtz-Eakin argues that attention should turn to reforms that could improve the program in addition to shoring up its finances:

Steps include reforms to the program’s payment and delivery systems, enhanced transparency and accountability, better support and coordination for vulnerable populations – the list goes on.  All of these steps (and more) should be part of a comprehensive effort to reform the Medicare program.

With Medicare looking at more beneficiaries than ever before in the next couple of decades, reforming the program should go beyond small fixes like replacing the Sustainable Growth Rate (SGR) formula. Policymakers should turn to comprehensive reform, especially reforms that bend the health care cost curve as we look to address the growth of health care spending.

Click here to read the full op-ed.