I recently watched a segment on MSNBC where host Lawrence O'Donnell asked his Republican guest, Rep. John Culberson (R-TX), whether, after opposing Obama's health care plan as socialism, he wanted to repeal Medicare as well. "Do you want to repeal Medicare? It's a single-payer socialized system!" O'Donnell badgered.

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The question was, of course, rhetorical. Medicare is one of our country's most prized programs. It has for the most part effectively covered the health care costs of seniors who have paid into the system their entire lives (Medicare has a 94% satisfaction rate among seniors). For liberals seeking a public insurance option, Medicare is the gold-standard. It is the citadel of big-government to health reform activists. Anyone who proposes repealing (or even significantly reducing) Medicare is blasted to Planet Crazy.

However, as we enter yet another decade, we need to take a hard look at how we view Medicare in this country. With Medicare (and let us not forget its younger sibling, Medicaid) dollars eating away at federal and state budgets and a looming surge in Medicare beneficiaries as baby boomers retire, there is growing evidence of Medicare's flaws, and the prospect that it needs to be scaled back is hardly unreasonable.

Mort Kondracke said it best: "Democrats in Congress, instead of trying to drive all Americans into a Medicare-style, single-payer health plan, should first figure out how to reform Medicare itself, which is rapidly going broke while failing to serve all the medical needs of seniors."

It's time to rethink Medicare.

For those of you who aren't familiar with how the Medicare system works, the program gets its funding from the payroll tax, a tax levied on your pay check throughout your entire working life. That money, however, is not saved for you in an account somewhere - instead, it's used to pay the current Medicare benefits that seniors are getting. The working generation pays for the health care of the retired generation. The system theoretically would be financially sound - however, health care costs are consistently rising, and as the baby boomers retire, the worker-to-retiree ratio is shrinking.

Medicare (the part that pays for hospital bills) is expected to go bankrupt in 2017. Medicare currently has an unfunded liability - what the government has promised to pay for minus what it can actually pay - of $34 trillion. This is several times the size of the entire U.S. economy! In order to pay for this insolvency, the Heritage Foundation has predicted that income taxes will have to be raised to 77% on some Americans, and 55% on others, or we will have to cut every other government program in existence.

The situation for Medicaid is even more extreme. Medicaid is a state-run program for the disabled and funded jointly by states and federal grants. State governors, both Democrats and Republicans, are protesting Congress' plan to expand Medicaid coverage to more people, arguing that they simply can't afford it any more.

This isn't conservative myth or corporate fear-mongering - these numbers are provided by the Congressional Budget Office, and the Social Security/Medicare Actuaries, which release annual reports on the solvency of the programs. Whether it happens ten years from now or twenty years from now, Medicare is set on a course to bankruptcy. In its June 2008 Congressional report, the Medicare Payment Advisory Commission said that "without change, the Medicare program is fiscally unsustainable over the long term and is not designed to produce high-quality care." The debate is not whether Medicare will implode, but how much of the federal government it will take down with it.

The younger you are, the more frustrated you should be with Medicare. Considering that Medicare is expected to go bankrupt in 2017, Americans who are already 50 years old may not see their Medicare benefits - let alone Americans in their 40s, 30s, or 20s. Younger Americans who see approximately 6% of their paycheck taken by the federal government through the FICA tax know that their hard-earned money will not be waiting for them when they retire half a century from now.

Contrary to what people like Mr. O'Donnell may say, Medicare does need to be seriously reformed and scaled back, lest we prepare ourselves for a future of massive tax hikes or eliminated government services. Even President Obama understands this, and has proposed $313 billion in Medicare and Medicaid cuts as a part of his health care reform plan.

Obama's plan, while not nearly enough to fix the problem, is an encouraging step forward, considering that for the past several decades any attempt at Medicare reform has been met with stiff opposition and outrage. Back in 1995, when the Republicans controlled Congress, GOP leaders set their eyes on reforming the Medicare system. Titled "The Medicare Preservation Act of 1995", the Republicans, led by Speaker of the House Newt Gingrich and soon-to-be presidential candidate Bob Dole, proposed $270 billion in cuts to Medicare spending. The Democrats, however, reacted furiously, and launched a massive campaign towards seniors that came to be notoriously known as the "Medi-scare." The Republicans did not provide enough details, the fear levels grew, and the Act died out.

Flash forward to today: although the AARP is still refusing to support any bill that cuts Medicare benefits, the Democrats have remained eerily silent. In fact, Obama's proposed Medicare cuts are hardly receiving media coverage.

If Republicans can put aside the political frustration of Democrats warming up to Medicare cuts now, as part of Obama's proposal, this can be an encouraging sign that perhaps we are finally able, as a nation, to discuss Medicare frankly without drumming up any Medi-scares. (Interestingly, AARP has seen a huge spike since July of seniors quitting AARP over the group's health care stance, although it's unclear whether the quitters were upset over AARP's aggressive pro-reform stance, or their seemingly calm attitude towards the possibility of Medicare cuts).

One option is to simply cut back how much Medicare will pay for a beneficiary's health care. According to the May 2009 report on Medicare from Kaiser, Medicare only pays for about 49% of beneficiaries' health expenses, with the remainder coming from out-of-pocket expenses, private insurers and Medicaid. While reducing that percentage even further would no doubt require seniors to rely more heavily on private insurance, it by no means would "take away" their health care as the Medi-scare campaigns used to say.

This strategy would also help lower health care costs all around. In an in-depth analysis of the Medicare debate back in 1995, Ted Marmor from Washington Monthly wrote that one of Medicare's biggest flaws in its conception was not being capped by a global budget. "No limit was placed on what the government would pay for its beneficiaries care," leading to a complete lack of discipline on how health care dollars for the elderly were spent. This has partly contributed to skyrocketing health prices.

Another major flaw with Medicare is the fact that it sets its own prices rather than allowing doctors to set prices. The government, in a sense, bullies the medical service industry into arbitrated prices that are less than what everyone else pays. "Medicare and Medicaid's regulatory power also enables them to underpay providers by an estimated $90 billion dollars compared to private insurers. Currently, private insurers pay higher prices to take up the slack," this Real Clear Politics article explains.

In a Washington Post op-ed on Thursday, orthopedic surgeon Marshall Ackerman vented his frustration over the argument that further government-imposed price controls are the key to reducing health costs:

"Consider the implications when a global fee will be paid to the hospital: Then hospital and physician incentives will be aligned, and patients will bear the cost of the search for ever-cheaper implants and techniques, such as a return to cemented total hips. Forget metal-on-metal bearings, resurfacing, rotating platforms, high-flex knees, navigation systems or bilateral replacements. And if our hospitals are financially penalized for occurrences such as infection and deep-vein thrombosis after surgery, who will operate on the obese, the hypertensive or the diabetics among us? Experience with government funding reveals a never-ending spiral of decreased reimbursements in the name of restraining costs. In the end, this will come out of the care we all receive."

Ackerman's op-ed raises the crucial point that even if regulated payments decrease prices, the quality of care we all receive could also decline as physicians look for the cheapest ways to do surgeries and other services. He also points out the fact that, while the U.S. does have skyrocketing health care costs, we offer an environment where resource-intensive medical technology advancements (which improve quality of our care) thrive.

There may be other solutions besides price-controls. What if we gave each Medicare beneficiary a monthly or yearly check to be spent on their health care, rather than allowing Medicare to pay for an unlimited demand of surgeries, drugs, and doctors appointments? Or what if your Medicare dollars went straight towards paying half of your insurance, rather than half of your services?

Medicare Part D, added in 2003, is a perfect example of this. Though Part D - the legislation that added prescription drug coverage to the list of things Medicare covers - is by no means perfect (it has accelerated Medicare's cost growth), it has showed that reforms oriented like the ones mentioned above can work. Part D subsidizes prescription drug benefits but outsources the delivery of them to private insurance companies. Simply put, Part D pays your insurance premiums, but you can choose which drug coverage plan you want to enroll in.

Joseph Antos explains:

"When Congress created Part D, the delivery of prescription benefits was left to private insurance plans which must compete for a share of the market. Competition puts pressure on the plans to negotiate hard for low drug prices, to encourage the use of more cost-effective pharmaceuticals, and to offer affordable premiums."

"Despite initial skepticism from political opponents, the competition strategy has succeeded beyond all expectation. The average Medicare beneficiary has more than 50 different Part D plan choices. More importantly, seniors and taxpayers are saving money. Premiums averaged just $24 a month in 2006, one-third lower than experts had predicted."

Further, by emphasizing prescription drugs, Medicare is potentially saving money (and reducing health costs across the board) in the long-term by making seniors less reliant on surgeries or other costly services.

And, while this alternative solution may be a harder sell to older Americans who have already been paying into the system for decades, the global budget plan would sit well with younger Americans. Because we haven't yet paid enough into the system for us to have a lifelong, vested stake in it, we are more open to reformative changes. Indeed, given the right legislative and political consideration, the younger generations may hold the keys to Medicare reform.

There are many ways to reform Medicare so that it can still deliver its promise of quality affordable health care to seniors while remaining fiscally restrained. The ideas above are just some of the proposals that need to be explored and debated further. But the time has come for us to drop the notion that we must simply model other government programs off of Medicare, unless we want to swamp our nation in a sea of red ink. So next time Lawrence O'Donnell asks you if you want to cut Medicare, say, "well you know what? I think we need to start thinking about it."

Because rethinking Medicare is the first step to actually reforming it.


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