NMN: Describe, in your view, the fundamental problems we have with the Medicare program and potential solutions.
Sen. Corker: Well obviously it is huge. Many people don’t realize the average American family who makes $43, 500 per year, contributes $119,000 into Medicare over a lifetime, including the portion their employer pays on their behalf in the form of payroll taxes. The average American family takes $357,000 out of Medicare. So fundamentally the math just does not work. On top of that, over the next 10 years, 20 million more Americans will be on Medicare, joining a program where the math already doesn’t work. We also have the fewest number of people working for each retiree that we have ever had in the history of our country so the problem is massive. The Medicare trustees have said that in 2024 the program will be insolvent. By putting the problem off, we continue to build up trillions and trillions of dollars of unfunded liabilities. So, we have to start now. If we start making changes now, actuarially, they multiply into huge numbers down the road. I am part of a group of 38 senators, 19 Republicans and 19 Democrats, that have asked the deficit super committee to go big, to really deal with Medicare and entitlement reforms. We need to deal with tax reforms simultaneously, and do it in a big way.
As far as solutions, I think that folks like me, who are more well off and had good fortune in life, we should understand that, through means testing, the benefits are going to be less, as they should be. We need to have beneficiaries with more skin in the game, through co-pays and that type of thing. We obviously have to deal with the eligibility age because people are living longer. The program was not designed to deal with people being in it as long as people now are because of increased longevity. We also have to migrate the eligibility age up.
The biggest issue is how to transform our healthcare system in general, not just Medicare. We need to migrate toward some type of outcome-based system. I think this issue is highly complex. It will take decades to fully evolve away from fee-for-service where there is a drive for more and more healthcare to be provided. This is going to be the major issue, but we have to begin by making some actuarial changes.
I think one of the best ideas that came out on Medicare was put out by Pete Domenici (former Republican U.S. Senator-NM). Basically he suggested creating a dual track that allows people, if they wish, to stay in the fee-for-service program or through premium support to go out and purchase their own private plan. To me that would be the beginning of something that could really help move Medicare down a healthier path from where it is today. The Obama administration laid out their healthcare bill, the IPAB (Independent Payment Advisory Board – see NMN June 2011: Congressman Phil Roe, MD & the Independent Payment Advisory Board) committee is going to be making changes.
NMN: Would you envision a time when Medicare is self sustaining and not dependent on general tax revenue transfers?
Corker: We have acted as if there were actual trusts set up. That is not the case. A more useful approach is to look at our overall impact on the economy. The proper way of looking at government spending is to determine the appropriate amount of resources that the federal government should take out of our economy. For the last 40 years, in the post-entitlement period, federal government spending has been 20.6 percent of gross domestic product. We are way up in the high 24’s now, moving to 25 … 26 … 27 percent, under current policies. The more healthy approach is not necessarily segregating funds but to determine overall how much do we take out of our economy to fund the programs the federal government is involved in. I believe that number is 20 percent. Let’s face it; the best way for us to deal with all of these issues is to have an expanding economy. Right now these structural issues, whether it is tax reform, entitlement reform, out of control federal spending in general, are taking away from the economic growth that helps solve these problems much more easily.
NMN: Due to the SGR (Sustainable Growth Rate), Medicare Part B providers are facing a 29.5 percent mandated cut starting Jan. 1. We have been going through this drill every year, some years multiple times per year, for close to a decade. One perspective that I think gets lost is that recent studies have shown that physicians’ net income is about 8-to-10 percent of total healthcare spending. So I wonder why we are continually fighting this SGR battle when that is a pretty small piece of the pie.
Corker: I couldn’t agree more. I was really stunned that in 1997, the AMA got behind this SGR approach before the details were worked out. So for what it is worth, this is one of those things where physicians place themselves in the center of a circular firing squad. This is something that physicians agreed to. The AMA has not done the work that it needs to do.
The issue that bothered me as much as any when the healthcare bill was passed is that the Obama administration, with AMA support, was willing to take $539 billion out of Medicare to create a new entitlement and not use that money to solve that SGR issue for the long term. I was on the Senate floor constantly arguing how short sighted that was. We could have taken $275-to-300 billion of that money and solved the SGR problem for a decade. Instead of doing that, the administration took that $539 billion out of Medicare, a little over half of that would have solved the SGR issue for a decade, and instead used it to leverage a new entitlement. It is this type of accounting — this type of nonsensical thinking as it relates to fiscal issues — that caused me to more stridently than ever be against this healthcare bill. Again, we all know that we are going to kick the can down the road. Physicians are not going to get a 29 percent cut. Everyone knows that, but that number just keeps building each year when what we ought to be doing is coming up with a long-term solution to SGR.
NMN: The America Hospital Association has recently indicated that cuts to hospitals could result in 200,000 lost jobs. What is your response to that?
Corker: Well, they sat in my office a few weeks ago. My response is that we cannot keep burying our head in the sand and just say “don’t affect me, affect someone else.” The hospitals say get the doctors; the doctors will say get those drug guys. The fact is that what I would expect of the professionals — especially Nashville, which is a hot bed of entrapranueralism and brilliant thinking as it relates to healthcare — is to bring solutions. What I would ask is that stakeholders don’t come up to Washington and talk with me about we can’t do. Help us figure out how to solve this problem for the long haul. If we don’t come up with innovative ways to saving these programs, somebody is going to get gouged. At the end of the day it is going to be the beneficiaries who depend on Medicare.
My response is that I am sympathetic and I understand. I’ve gone through the math. I understand what that means to Tennessee. Tennessee’s healthcare providers are major employers, no question. Instead of coming up and saying, “don’t cut me,” help us figure out how to solve this problem. It is not only good parochially for the industry to help us solve the problem, but it is right for the country. The biggest issue we face as a country from a fiscal standpoint is solving this problem. What we are doing right now is eating our seed corn, continuing to cut discretionary spending that funds things like science breakthroughs, labs, infrastructure, the kinds of things that build tremendous economic and human capital in this country. Our country’s greatness is dissipating every day that we don’t address these issues. So yes I am sympathetic, but just coming here and saying “don’t cut me” is not a solution. A solution is helping us figure out the right long-term solution and then helping us marshal the political support to make it happen.