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Taking Aim at Entitlements

No Matter the President, Certain Fixes Are Inevitable

Congress is likely to make changes next year to both Medicare and Social Security, but the scope of those changes will depend on whether Sen. John McCain (R-Ariz.) or Sen. Barack Obama (D-Ill.) wins the White House.

“Strengthening Medicare and Medicaid will be a top priority for a Democratic-controlled Congress,” a senior aide to Speaker Nancy Pelosi (D-Calif.) said earlier this month.

Lawmakers and the next administration will be forced to consider overhauling the programs because they are on shaky financial footing. The Social Security and Medicare Board of Trustees estimates Medicare will be bankrupt by 2019.

The Congressional Budget Office estimates federal spending on Medicare and Medicaid will continue to be a larger percentage of the gross domestic product, growing from 4 percent of GDP in 2007 to 9 percent in 2032 and 19 percent in 2082, a growth level experts say is not sustainable.

Leading Members of Congress, including Pelosi and Senate Finance Chairman Max Baucus (D-Mont.), have already pledged to overhaul the health care entitlement programs in 2009.

Those efforts could focus on providing more money to ensure that more low- income children receive coverage under the State Children’s Health Insurance Program and that Medicaid-eligible adults receive health care, aides said.

Democrats will probably have an easier time moving their entitlement agenda in the 111th Congress because they are expected to pick up seats in the Senate, moving them closer to the 60 votes needed to end any potential Republican filibusters.

However, any reforms will likely have to focus on cost-cutting as part of the effort because of the growing influence of fiscally conservative Democrats in the House, according to the Heritage Foundation’s Stuart Butler.

Key lobbying groups, such as the American Medical Association and the National Association of Manufacturers, also are set to back entitlement changes.

Obama and McCain, however, have very different approaches for overhauling the programs.

Obama would seek to expand the current entitlement system, while McCain would focus more on expanding the role of the private sector in ensuring health coverage. The differences between the candidates are “pretty stark,” one health care lobbyist said. (See related stories, p. 14.)

Two of the most pressing entitlement issues that Congress will face next year are renewing SCHIP and freezing the Medicare reimbursement rate for doctors, known as the Sustainable Growth Rate.

SCHIP is considered the first priority because the program will expire in April.

While lawmakers tried repeatedly to reauthorize and expand SCHIP this past year, President Bush vetoed it and Democrats lacked the votes to override. If Obama becomes president, an extension and expansion of the program could happen within his first 100 days in office, a former Bush aide said.

If McCain is president, he will likely also be open to extending and expanding the program, even though he has historically been opposed to expanding entitlements.

McCain could be forced to compromise because Democrats will likely have more votes in the Senate — possibly enough to override a veto, one former Congressional aide said.

The biggest obstacle to freezing the SGR will be cost, various sources said. Eliminating adjustments for doctors’ rates could cost up to $300 billion over 10 years, and there simply isn’t the money to do that, a health care lobbyist said.

As a result, Congress will once again likely propose a temporary adjustment to doctors’ reimbursement rates. The cost of subsidizing the gap between what physicians are paid for their Medicare services and what they are entitled to receive is rising.

Doctors are due for a 21 percent cut in rates in 2010; lawmakers already delayed a 10 percent rate cut this year at a cost of $9.4 billion over 10 years.

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