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January 26, 2009 at 07:00 PM
In the long run, Congress should put Medicare, Social Security and the rest of the U.S. economy on sounder footing, but, in the short run, subsidizing health insurance for unemployed workers is a good idea, economists told lawmakers today.
The economists testified today at a House Budget Committee hearing on the U.S. economic outlook and budget challenges.
Analysts in the Congressional Budget Office and the Bush administration have warned for years that the Medicare program is already close to insolvency, and that the aging of the baby boomers will pose additional challenges both for Medicare and Social Security.
Vigorous efforts should be made to make Medicare more cost effective, and restraining Medicare cost growth would be a good first step toward comprehensive health care reform, according to Alice Rivlin, an economist who was head of the Office of Management and Budget during the Clinton administration.
“Medicare is the largest payer for health services and should play a leadership role in collecting information on the cost and effectiveness of alternative treatments and ways of delivering services, and designing reimbursement incentives to reward effectiveness and discourage waste,” Rivlin said.
Congress also should take a hard look at Social Security, Rivlin said.
Fixing Social Security is a “relatively easy technical problem,” Rivlin said, adding that the solution could involve a combination of moves such as gradually raising the normal retirement age and indexing it to longevity; raising the cap on the payroll tax; changing the cost of living adjustment mechanism; and having benefits grow more slowly for more affluent people.
The current financial turmoil may have made Social Security less of a political third rail, and fixing Social Security would be a “confidence building achievement for bipartisan cooperation and would enhance our reputation for fiscal prudence,” Rivlin said.
