Natalie Gonnella
With Republicans threatening to block increases to the federal debt limit unless the White House demonstrates greater leadership when it comes to entitlement reform, the House Budget Committee today heard testimony regarding the future of Medicare, Medicaid and Social Security.
In contrast to Senate Majority Leader Harry Reid's view that reform can wait, nearly all of those giving testimony today stressed the need for bold, immediate action, advocating for a number of reforms currently being championed by Republicans like Congressman Paul Ryan.
Here's a quick look at some of the key points from some of today's speakers:
Committee Chair Congressman Paul Ryan:
For the past several months, a number of us have been saying we need to have a serious, honest conversation with the American people about these problems. The time for that conversation is now – and I firmly believe the American people are ready for it. They have had enough instability in their lives lately, and they deserve a federal health and retirement safety net they can count on. If Congress wants to avoid defaulting on federal health and retirement programs, it must advance solutions that free the nation from the shadow of debt, strengthen its health and retirement safety net, and protect those in or near retirement from disruptions. If – and only if – we act now, reforms can be phased in and gradual; conducive to economic growth and consistent with our historic commitment of leaving the next generation of Americans with a more prosperous and secure nation.
[W]e must address Social Security and do it soon. Social Security, while separately funded by payroll taxes, is not in sound fiscal shape for the long run. Since putting Social Security back on a firm foundation will make only a modest contribution to reducing long run deficits, deficit reduction is not the central motivation for fixing Social Security. The right reason for saving Social Security is to reassure all Americans that this hugely successful program is solidly funded and will be there for the millions who depend on it when they need it. The main reason for acting now rather than later is simply that the sooner we act the less drastic adjustments we have to make. These adjustments can involve revenue increases, future benefit reductions (with or without retirement age changes), or some of each. They need not be large if they are done quickly and they need not have a significant effect on those currently retired or close to retirement...Taking immediate action is the right thing to do for future Social Security beneficiaries.
Charles Blahous, Research Fellow at the Hoover Institution and Public Trustee for Social Security
There is another very important practical reason why delay is potentially very costly, even threatening to Social Security. It is very challenging to bring opposing perspectives together around a common plan of action for Social Security under any circumstances. Consider the difficulty we already have in bridging our differences about Social Security; it only gets harder to do this as the inevitable tax increases and benefit adjustments for affected generations grow larger.
In 1983, the program came within mere months of insolvency and an interruption of vital checks to beneficiaries. That was with both parties agreeing on the immediacy of the problem, and on the dire consequences of failure.
For additional perspective, consider that though in the early 1980s there was a threat of immediate insolvency, in other respects the situation was not nearly as severe as what we now face. Our situation is deteriorating far more quickly. Back in the early 1980s, the worker-beneficiary ratio was still relatively stable for decades to come and the long-term costs of delay weren’t nearly as great as they are now. For example, though the 1982 Trustees’ report warned of near-term insolvency, it actually projected program surpluses in the 1990s and beyond, in contrast with our current projections of permanently growing long-term deficits.
Moving toward a defined-contribution approach to reform [Medicare] would allow for much greater federal budgetary control, which is of course a primary objective and tremendously important for the nation’s economy and long-term prosperity. But this isn’t just a fiscal reform. It’s a crucial step toward better health care too because it would put consumers and patients in the driver’s seat, not the government. With consumer making choices about the kind of coverage they want as well as the type of “delivery system” through which they get care, the health system would orient itself to delivering the kind of care patients want and expect.
Critics argue that this improved fiscal outlook that would flow from moving toward defined contribution health care would come at the expense of the beneficiaries, who would bear the entire risk of costs continuing to rise faster than the government’s newly fixed contribution.
But that would only be the case if building a functioning marketplace had no discernible impact on the productivity of the health sector. It is far more likely that converting millions of passive insurance enrollees into cost conscious consumers will have a transformative effect on health care delivery, and for the better.
The full testimony from today's hearing can be viewed here.
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