“The CBO projected in 2022 that the debt will rise from 98% to 185% of gross domestic product over the next 30 years, far surpassing the levels reached during World War II,” writes Manhattan Institute senior fellow Chris Pope for the Wall Street Journal. “Outside rising interest payments, three-quarters of the CBO’s projected deficit increase is due to Medicare alone.”
In other words, the debt problem is largely an interest and entitlement problem, and the entitlement problem is largely a Medicare problem.
In one sense, this is encouraging. If so much of the overall problem is concentrated in one place, making improvements in that one place will go a long way to solving the problem. That’s better than having to scour every nook and cranny of the federal budget.
But politicians seem more willing to search every nook and cranny of the federal budget than they are to reform Medicare. That remains true despite the fact that all other federal spending except net interest payments and entitlements is projected to decline as a percentage of GDP according to the CBO’s long-term forecasts.
We see this dynamic in the current debt-ceiling agreement, which both parties promised would not touch Medicare. There’s a lot to like in the agreement, but it’s hard to say it addresses the debt problem when it doesn’t address Medicare.
Pope writes that Medicare’s cost increases are not driven primarily by price changes or demographics. “The program’s projected growth is instead driven by the constant addition of new procedures and services to what’s covered by Medicare, and with no legislative oversight to ensure that taxpayers are getting value for money,” he writes.
These additions often occur without involvement from any elected officials. Instead, the Centers for Medicare and Medicaid Services (CMS), part of the federal bureaucracy, adds new billing codes that are then covered by the program. “The result is that neither Congress nor the executive branch is responsible for considering the cost of adding new services to the basic Medicare benefit package,” Pope writes. “Not surprisingly, this imbalance encourages lobbyists to goad CMS into reclassifying minor tweaks that would otherwise be simple billing-code adjustments to existing services as entirely new procedures.”
Pope recommends requiring congressional approval for new billing codes that would increase the deficit. Congressional approval is already required for changes to other aspects of Medicare that would increase deficits, so it’s not a new idea. It also wouldn’t reduce benefits below what is currently available. It would nonetheless help to restrain future growth in Medicare outlays, or at the very least, give Congress the opportunity to do so.