Medicare's bloated budget must be reduced.

• Author: Riczo, Steven

Billions of dollars wasted on an inefficient health care system takes money that could be used by taxpayers for food, clothing, shelter, and educating their children.

In attempting to balance the Federal budget, health care is a vital focal point, as evidenced by the November, 1995, standoff between Congress and the Clinton Administration. The Senate's budget proposal would reduce projected spending by $961,000,000,000 in seven years, with $256,000,000,000 coming from Medicare and another $202,000,000,000 from Medicaid and other health-related programs, representing 47% of the total cuts. The House budget seeks an additional $26,000,000,000 from Medicare and slightly less from Medicaid. Even using these parameters, increases would be permitted in these programs at a rate that exceeds the Consumer Price Index. There is no true cut in the health care spending budgets, but, rather, a slowing in the rate of growth. The fundamental question that arises is whether Medicare really needs to be funded at the 10-12% spending increases of recent years, with even greater funding going to Medicaid.

Medicare serves approximately 37,000,000 elderly and disabled recipients; the primary emphasis is on about 34,000,000 Americans over age 65. Of the funding, 52% goes to hospital inpatient care; 7.2% for outpatient treatment; 23% for physician payments; and the remainder to home health, nursing home, and other services. Current annual spending is approximately $195,000,000,000. Federal and state governments combined pay 44% of the nation's health care expenditures, the former covering 32%. Federal spending in 1996 for both Medicare and Medicaid is estimated at around $290,000,000,000.

There is significant cost sharing in the Medicare program, with the average recipient laying out about $3,000 per year in out-of-pocket expenses, including Part B (physician payments) premiums, copayments, and deductibles and Part A (hospital) deductibles and copayments. Over all, coverage includes most medical, hospital, test, and procedure needs with some exceptions, notably pharmaceuticals. Seventy percent of Medicare recipients purchase supplemental insurance, commonly referred to as Medigap, to cover their copayments and deductibles, while another 20% of low-income recipients receive such coverage from Medicaid. Those with Medicare spend an average of 23% of their incomes for out-of-pocket health expenditures; low-in-come recipients, more than 30%.

There are significant evidence and health care trends that support the argument for substantial reductions in the growth rate of Medicare. Inefficiencies in the health care delivery system have been well-documented. Former Surgeon General C. Everett Koop maintains that there is 20% waste in the current system. The Rand Corporation and others have documented unnecessary procedures, and physician observations regarding inefficiencies are replete in health care literature. According to The Journal of the American Medical Association, the consensus of studies in the 1980s was that between 20 and 25% of hospital services to the elderly were inappropriate. The AMA's reform proposals emphasize...