April 5, 2005
The 2005 Medicare Trustees Report issued last month makes plain that Medicare cannot go on forever. But no one wants to confront the reality that the escalating costs of this entitlement program must be curbed, says Michael F. Cannon, director of health policy studies at the Cato Institute.
Congress should act now to give seniors ownership over their Medicare benefits by moving it from a system where the political process defines (and revokes) benefits to a system where seniors choose the benefits that matter most to them, says Cannon.
- Medicare could give each senior a voucher with which to purchase health coverage. Seniors could supplement the voucher with their own funds if they want more generous coverage.
- If seniors choose, the voucher could fund a health savings account as well; Congress could adjust the size of vouchers according to health risk.
- Giving seniors with more expensive health conditions a larger voucher would prevent insurers from avoiding those with high medical bills.
Better yet, Congress could give seniors ownership over their Medicare benefits from day one, explains Cannon:
- Economists have proposed allowing workers to place their Medicare payroll taxes into a personal retirement health savings account.
- They argue this would allow the power of compound interest to help prefund Medicare's future liabilities.
- Such a reform would also guarantee that future politicians cannot revoke seniors' health benefits.
Giving seniors ownership over their health-care dollars would give them maximum latitude to preserve the benefits that mean the most to them as individuals, and it would spare them the misery of having politicians and bureaucrats eliminate the coverage they value the most.
Source: Michael F. Cannon, "How to Save Medicare," Cato Institute, April 4, 2005.
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