Medicare Reform
A New Public-Private Partnership

Today, more than 40 million Americans rely on Medicare for their health care. Medicare recently celebrated its 36th anniversary but at this rate, the program will not make it to old age. Medicare is in dire need of a tune-up that will ensure its viability for generations to come. Reform of Medicare through a new public-private partnership is the solution.

Congress has been debating the future of Medicare and the feasibility of including prescription drug coverage for seniors. This discussion must consider how the public and private sectors can join forces to create a new Medicare that will provide even better and more cost-effective health care for today and tomorrow’s seniors.

Medicare’s financial future will continue to be bleak without reform. More than 50 percent of Medicare’s revenues are derived from payroll taxes, with another 30 percent from income taxes. Since Medicare was created in 1965, there have been 36 separate tax increases associated with the rising costs of the Medicare program.

The payroll tax is especially onerous for small businesses. Today, 2.9 percent of every dollar paid in wages supports Medicare, and studies show that payroll taxes will increase to a whopping 5.6 percent if Medicare is not improved and strengthened. If this trend continues, companies—particularly small businesses—will simply fall victim to the heavy burden of taxes.

Following principles outlined by President George W. Bush, Congressman William Thomas (R-Calif.) plans to introduce a bill calling for a Medicare public-private partnership. Under such a proposal, seniors and disabled Americans will have more choices in their health care and their medical decisions.

Senators John Breaux (D-La.) and Bill Frist (R-Tenn.) have already introduced legislation, which outlines a comprehensive Medicare reform plan. Modeled after the Federal Employees Heath Benefit Plan (FEHBP) that more than 10 million federal employees and retirees enjoy, the Breaux-Frist plan is based on a public-private partnership. It guarantees all seniors basic prescription drug coverage, as well as a choice of health plans.

The FEHBP is a public-private partnership that has worked well for many years. Successful private sector health options need to be part of the new Medicare program in order to provide seniors with improved and cost-effective health-care coverage. This new market-based approach will give seniors the flexibility to remain with the current Medicare program or select another health care plan that better fits their needs. Simply put, free market initiatives will give seniors more control at an affordable price.

Beginning in the next decade, 77 million baby boomers will join the ranks of Medicare recipients. Without reform, the current Medicare system cannot handle such a huge increase in beneficiaries. Tomorrow’s seniors will have different expectations regarding their heath care, and they will not be satisfied with the archaic delivery structure and coverage that Medicare currently provides.

Americans deserve a top-quality health care and a comprehensive system that delivers the services that seniors need. This system would combine the best of the private sector—market-based, competitive health-care delivery—with the best of the public sector, which is financing and oversight. A new and better Medicare can be structured to keep costs down and, in turn, prevent skyrocketing increases in payroll taxes. With the correct approach, a better Medicare will provide adequate care to an aging population at an affordable cost.

When Congress resumes its domestic, health care policy debate, the future of Medicare should be a priority. A future that will provide a stronger and better Medicare for all Americans who rely upon it and that uses the most effective approach—public-private partnerships that have proven to work.

Dorcas R. Hardy is the National Spokesperson for Citizens for Better Medicare. She may be reached by phone at 202.661.3945 or by e-mail at drhardy@pimllp.com