Jeb Bush

Jeb Bush Wants to "Phase Out" Medicare. It's Not As Exciting As It Sounds.

Medicare as we know it is unsustainable if we leave it alone.

|

Gage Skidmore

Jeb Bush is attracting some attention and criticism for saying that he wants to "phase out" Medicare. Bush's full remarks, however, are rather less exciting than the headlines make them sound. He is, however, correct to recognize Medicare's shaky fiscal future, and the need to begin the process of reforming the program now.

In a forum yesterday hosted by Americans for Prosperity, the GOP presidential noted Rep. Paul Ryan's proposal to transform Medicare into a premium support system and recalled ads targeting Ryan for the plan. The not-very-subtle ads showed someone who looked like Ryan pushing a senior in a wheelchair off a cliff. Bush complained that this was the typical response from the left when questions are raised about the future of entitlements.

He then goes on to argue that it's important to make the case for entitlement reform.

"I think we need to be vigilant about this and persuade people that our, when your volunteers go door to door, and they talk to people, people understand this. They know, and I think a lot of people recognize that we need to make sure we fulfill the commitment to people that have already received the benefits, that are receiving the benefits. But that we need to figure out a way to phase out this program for others and move to a new system that allows them to have something—because they're not going to have anything."

Bush's plan to "phase out" Medicare, in other words, is a plan to keep providing current Medicare benefits to those who already get them, and, over some period of time, transition to another sort of system—presumably something along the lines of the premium support system that Rep. Ryan has proposed—that would provide health coverage for seniors. 

Transitioning Medicare into a premium support system would, as critics have charged, end Medicare as we know it. But Medicare as we know it is on track to end in fifteen years anyway.

The program's 2015 Trustees report, released this week, once again projects that the Hospital Insurance Trust Fund will be exhausted by 2030, leaving Medicare with the ability to finance 86 percent of its obligations, an amount that declines to 80 percent by 2050. These are projections, subject to change, but it's clear that Medicare in its current form won't be around for too much longer.

Still, fifteen years is far enough away that it may seem like there's no real urgency. Why worry about addressing the program's fiscal shortcomings now?

The Trustees report for the nation's other major senior entitlement, Social Security, provides the answer. Social Security is divided into two legally and financially discrete sections, the retirement trust fund and the disability trust fund. The retirement trust fund is currently on track to be exhausted in 2034, a few years after Medicare stops being able to pay all of its bills.

The disability insurance fund, however, is set to run out next year. If that happens, The New York Times reports, "eleven million people [will] face a deep, abrupt cut" in their benefits.

The Obama administration is urging Congress to pass legislation allowing Social Security to transfer funds from the retirement trust fund to the disability trust fund in order to prevent those cuts from happening. The Trustees report somewhat grudgingly agrees that Congress should allow for reallocation, but states that this will not be enough and warns that additional structural changes will be necessary.

As the Trustees report points out, we've seen this movie before, in 1994, when the Trustees determined that the SS disability insurance trust fund was near depletion. Then, as now, the Trustees urged Congress to pass legislation allowing some of Social Security's retirement funds to be reallocated, and also to identify ways to restore the program's long-term fiscal balance. The idea was that the reallocation would buy time for Congress to overhaul Social Security to make it truly sustainable.

Obviously that didn't happen. Congress allowed for some funds to be reallocated to prevent the disability trust fund from being depleted, and then never followed through with larger, longer-term structural reforms. As a result, the latest Trustees report explains, "there are fewer reform options available now than there were in the 1990s, when the projected date of reserve depletion was more distant."

Indeed, the reports author's suggest that, given the short time frame, reallocation may be necessary to prevent those sharp, abrupt cuts the Times warned about, but the report's authors also worry that a reallocation plan will "serve to delay DI reforms and much needed corrections for OASDI as a whole."

The point to remember is that Congress bought itself two decades to enact meaningful fixes to Social Security's shaky finances, and it failed to do so in that time. Now the problem is even more dire, and the available fixes are fewer.

This is a neat lesson in how not to treat Medicare. The exhaustion of the senior health program's trust fund is just fifteen years away; this is actually not all that much time to enact a significant course correction to one of the country's most expensive federal programs. We can either begin the process of slowly and carefully phasing out the program and making an orderly transition to something else, as Jeb Bush suggests, or we follow the path we took with Social Security's disability trust, by waiting, doing nothing, and then one day a decade a half from now finding ourselves faced with abrupt benefit cuts, and even fewer options to prevent them.  

Watch video of Jeb Bush's remarks on Medicare below:

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

51 responses to “Jeb Bush Wants to "Phase Out" Medicare. It's Not As Exciting As It Sounds.

  1. This is a neat lesson in how not to treat Medicare. The exhaustion of the health program’s trust fund is just fifteen years away, which is actually not all that much time to enact a significant course correction to one of the country’s most expensive federal programs. We can either begin the process of slowly and carefully phasing out the program and making an orderly transition to something else, as Jeb Bush suggests, or we follow the path we took with Social Security’s disability trust, by waiting, doing nothing, and then one day a decade a half from now finding ourselves faced with abrupt benefit cuts, and even fewer options to prevent them.

    That is not a particularly clear or well written paragraph. So, forgive me if I am reading it wrong. Isn’t this saying Bush’s approach is right? And if his approach is the proper one, why is it “not as existing as it sounds”? I don’t understand the headline. The story seems to be saying Bush’s plan is the best and probably only available option. The headline implies it is some kind of fake option.

    1. Just let a Republican try to reform Medicare. The commercials showing Jeb pushing granny in a wheelchair off a cliff will be 24/7.

      1. No kidding. I think it could be done. You would have to do it like this where everyone knows old people are not being cut off and young people are phased into a different program and can plan accordingly.

        1. The reality wouldn’t matter, it’s all about scoring political points against the other team.

        2. The only way in hell it gets reformed is by framing doing so as sticking it to the one percent (greedy rich geezers) while leaving the deserving poor alone.

        3. Every reform plan is just that. No one would face any cuts to their current money, and in fact, most people nearing retirement would not either.

          But for some reason, old people imagine they will live to be 150 years old.

          1. AARP may live to be that old, even if its members do not.

          2. Hey, you never know…

            1. Actually, someone explained that the elderly may be wise to fear the camel’s nose under the tent…but still.

        4. “You would have to do it like this where everyone knows old people are not being cut off and young people are phased into a different program and can plan accordingly.”

          It’s too late for that to work John. If you implement a “different program” without touching current retirees money, you’ll have two very disparate programs. The old one, with large amounts of funding, and the new one with substantially less funding (maybe 60% per capita of the older program). I’m 46, I’m not going to stand for people 17 years older than me, getting 50% more benefits because they got on the “original” plan before the line was drawn. I would say most Gen-Xer’s would be upset to the point of protest if the Baby Boomers tried to screw us over that way.

          A new program is fine. I’d love to see an option available. But you have to apportion the money roughly evenly on a per capita basis. You can’t go with the, “Yeah you’ve paid in for the last 30 years, but we can’t ask the Baby Boomers to take even a small cut, now can we?”

          1. “I’m 46, I’m not going to stand for people 17 years older than me, getting 50% more benefits because they got on the “original” plan before the line was drawn”

            Then you will be subsidized by your children, who will in turn get nothing. There is no money

            I quite enjoy these talks about government once the money runs out. The mob truly is red in tooth and claw. And the old will always go kicking and screaming into their graves, dragging the young with them.

            Remember when Hayek suggested the possibility of an inter generational war? And how of course the young would win such a conflict, and put the elderly into concentration camps?

          2. Good point that as time passes, the easy solutions morph into harder ones.

            Slowly extending the date of SS beginning would help.

      2. We should pushing granny into a fucking woodchipper. Sick of these old fucks stealing my money then expecting a seat on the train.

    2. Apparently, you have a reading comprehension problem – no Reason writer would ever write a paragraph suggesting anyone named “Bush” was taking the correct approach. Everyone else out there talking about “phasing out Medicare” have better plans.

  2. Yeah, that’ll work out about as well as when W wanted to reform Social Security.

  3. Everyone wants to reform entitlements, but not in such a way as to have an effect on benefits.

    1. Yeah, everyone wants their pony, paid for by rainbows and unicorn farts.

    2. No kidding. All of the liberals I’ve seen simply say that axing the income cap on the FICA taxes will fix everything, because that will generate enough revenue to solve the problem. Of course, they don’t back this claim up with any, you know, math.

      1. The rich don’t pay their fair share! How could they pay their fair share and still be rich?

        1. Tax the rich,
          Feed the poor,
          Till there are no
          Rich no more!

          (Because money is EVIL if it is earned, but GOOD if it is moved from here to there, to anywhere, actually, by Government Almighty!)

      2. Okay, yeah. It’s called using Google.. http://www.ssa.gov/oact/solven…..n096.html.

  4. There’s zero incentive for dems to engage in this debate. Run out the clock (and the money), enter into a crisis and point the finger at the GOP and chant “they’re for tax cuts for the wealthy, we’re for healthcare for the poor and elderly.”

    1. If you watched the video the black lives matter protesters humiliating O’Malley, he actually was being asked if he supported raising social security benefits, like Benny Sanders is.

      He said “Of course, yes”

      We may not be Greece…yet. But when people run explicitly on such a platform, we’re close.

  5. Lets bring back the discussion about death panels that arose during the Affordable Care Act. I think it’s time.

  6. What a silly headline, there’s nothing exciting about Medicare.

  7. America is Doomed, ch 3,226,942

    Uber wants a debate with New York City Mayor Bill de Blasio over a city proposal to limit the growth of the car-hire service in New York. That demand alone defines a big part of the problem: Uber doesn’t understand rules or protocol or proportionality ? in this case, that no one from Uber is on the same level of importance as de Blasio, and therefore has no business asking him to appear on the same stage, literal or virtual, as equals. And they are not equal.
    .
    Pesky rabble, how dare they petition the government for redress of grievances?
    Lord deBlasio has more pressing concerns than the whining of shopkeepers.

    1. This column in 1775:

      in this case, that no tea distributor in Boston is on the same level of importance as His Majesty, and therefore has no business asking him to appear on the same stage, literal or virtual, as equals. And they are not equal.

      1. Fucking tea toters.

  8. The part B trust fund is only for hospitalizations. Part A has been propped up by general funds pretty much since day one.

    Let’s stop with the trust fund bullshit. There aren’t any. Johnson raided them DECADES ago. SS and Medicare are de facto paygo programs. SS went bk in 2010. That is when receipts fell behind payouts. And the problem is only getting worse. Or if you must persist in the myth of trust funds, then you have to immediately shift all of that intra agency debt to outstanding public debt, because that’s exactly how it’s going to be repaid.

  9. Goodbye Jeb,

    I won’t miss ya.

  10. The disability insurance fund, however, is set to run out next year. If that happens, The New York Times reports, “eleven million people [will] face a deep, abrupt cut” in their benefits.

    And in an election year. Wonderful.

    Here’s my prediction:

    The Repubs will demand a 5% tax hike and a 10% cut in benefits to save the program.

    The Dems will respond by demanding 15% tax hike and a 10% increase in benefits.

    They will compromise on the “20/20” plan: a 20% tax hike, and a 20% increase in benefits.

    1. I don’t disagree. However, I predict that when the percentage of money they suck from a young relatively poor person’s paycheck becomes high enough, a lot of geezers on their Hoverounds are gonna have an “accident”.

    2. All Dem candidates are in agreement that we need to increase social security benefits…ok, Hillary hedges that of course.

  11. Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…
    http://www.jobnet10.com

  12. Suderman, why do you talk of the trust funds as if they were a real asset? You even repeat the fantasy about how the “trust fund is currently on track to be exhausted in 2034”.

    Don’t you know that the trust funds only contain government bonds which are debt the government owes to itself? We have already gotten to the point where SS taxes no longer cover the SS payouts. Cash in a bond from the trust fund, right?

    Well, where does that money come from? It either comes from 1) reducing other spending (LMAO!), 2) increased taxes, or 3) new debt somewhere else. If you picked 3 you’re a winner!

    1. Thank you, sir.

      We have to stop using the false premises and language of our enemies. They have constructed these premises and the terms of debate to control the outcome to their favor.

      Rather than this:

      The program’s 2015 Trustees report, released this week, once again projects that the Hospital Insurance Trust Fund will be exhausted by 2030, leaving Medicare with the ability to finance 86 percent of its obligations, an amount that declines to 80 percent by 2050.

      Something like this would be more accurate:

      Currently, ___ % of Medicare’s funding comes from the Medicare payroll tax, with the remainder funded out of the general budget (through the accounting mechanism of a “trust fund” holding “bonds” for money that Medicare “loaned” to the general budget when the Medicare tax collections were more than Medicare needed). The 2015 Trustees report indicates that this “trust fund” will be exhausted by 2020.

      However, its not clear what difference this will make to Medicare funding or benefits, since anything not funded by the Medicare tax is funded by general revenue and can continue to be funded by general revenue regardless of whether we are, on paper, redeeming bonds.

      1. Made the point up thread already (but i swapped parts A and B). B receives 73% of its funding from the the general fund. That is not a repayment of the trust fund but a straight forward transfer.

  13. Avik Roy had a plan to slowly push out the age, like by a couple months per year while voucherizing it using the ACA so no one would really even notice that suddenly Medicare was privatized.

    Its not a bad plan as it also works for Medicaid, but it does mean keeping the ACA exchanges around. Which I think will happen anyways.

  14. presumably something along the lines of the premium support system that Rep. Ryan has proposed?that would provide health coverage for seniors.

    Premium support + privatization = Obamacare.

    1. No, BarryCare expanded Medicaid (shitty government program that may or may not have any privately managed elements), knocked millions off of existing appropriate coverage, and instituted a subsidy for net couple of million people to buy heavily regulated and mandated “private” coverage.

      So aside from being completely wrong you got it right.

    2. Which is better than Medicare = Single Payer.

  15. Ima go out on a limb here and suggest that people currently on Medicare can keep their program but those of a specific age (say, 21) have a choice; they can go with Medicare as it’s currently set up or put money into something like a health savings account which is under their control and which the government cannot touch.They can put that money wherever they please and government can’t use it for tax purposes.

    This, combined with abolishing Obamacare and letting insurance companies operate more rationally would go a long way to solving health care problems.

    I realize this isn’t particularly libertarian of me, but it would get government out of health care, if gradually.

    Feel free to carp,cavil or fleer.

    1. a health savings account which is under their control and which the government cannot touch.

      These exists today.

      Letting millions opt out will only hasten the demise of Medicare. Which is ok with me but would be political suicide for the party that did so.

      1. These exists today.

        Ask your mom about the limits to current HSA’s. I’m assuming she has a job to pay for your internet access.

      2. The ACA almost killed HSA’s though.

        Its not like they love them.

  16. So people who didn’t pay for it should get it free but people who did pay for it don’t deserve it. I see what they did there.

  17. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  18. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  19. Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…
    http://www.jobnet10.com

  20. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

Please to post comments

Comments are closed.