America’s Entitlements Are Unsustainable. Here’s Three Ways to Fix Them

As I explained last week, the national debt poses an existential threat to America’s future. Put simply, the government is spending far too much money on far too many things.

The main problem is our unreformed entitlements system. Unless these programs are addressed, my generation and those that follow can expect a future of high interest rates, ever-higher taxes and bankrupted government services. Economic growth will shrink alongside private investment and American living standards will decline.

Recognizing the crisis, here are some reform ideas for the three big entitlement programs.

Note: All figures are 10-year timeline extrapolations based on U.S. government statistics.

1) Reform Medicare

This is the big one. First, we should raise the Medicare eligibility age for those under the age of 52 from 65 to 69. This should be staggered so as to protect those closer to 52 from unexpected costs. Yet this reform would save hundreds of billions.

Second, we should means test Medicare to ensure that only those who truly need coverage receive it. Some will complain. But as the Urban Institute reports, the average new Medicare recipient in 2015 will receive lifetime benefits three times in value what they paid into the system. That divergence is only set to grow in the years ahead. This reality is stealing my generation’s future.

Third, we must reduce incentives for wasteful overlapping services by bundling Medicare payments for inpatient and outpatient care. This would save $70 billion.

Fourth, we should save $160 billion by introducing cost share-equity between Medicare Part A and B. The savings would be found from discouraging unnecessary procedures.

We must also become more aggressive in scrutinizing hospitals that overcharge Medicare. As numerous reports have explained, the difference between what two hospitals charge for the same treatment often varies by thousands of dollars. Excluding the most expensive hospitals from Medicare would be a good step. In turn, we must also require doctors to provide access to Medicare patients.

Sixth, we should increasingly scrutinize Medicare provision of drugs to those in terminal near-death situations. Medicare’s looming bankruptcy requires us to prioritize resources on treatments that sustain lives over the medium to long term.

Finally, as part of a broader effort to restrain health care inflation, we should introduce medical malpractice reform. This could involve capping payouts and ensuring that frivolous lawsuits (which constitute the vast majority) are thrown out of court. This would save $70 billion. Regardless, we must engage in wholesale reform of our health care system. My broader thoughts can be found here.

2) Reform Social Security

To start, for those below the age of 52, we should raise the Social Security eligibility age from 66 to 72. Again, these changes could be staggered in over a number of years, but would save around $100 billion.

Second, we should require all new-hire local and state government workers (some are currently excused) to pay Social Security taxes. By ensuring all Americans pay into the system, we’d raise another $90 billion towards its solvency.

Additionally, we should change the inflation-calculation measure with which increases to Social Security payments are assessed. At present, Social Security payments increased with the consumer price index (CPI). We should move to a chained-CPI: a more accurate measure of inflationary pressures. This would save $150 billion over 10 years.

Fourth, we should reduce Social Security payments to high-wealth retirees. This would save at least $60 billion over ten years. Fifth, we must introduce far more rigorous standards for the Social Security Disability system. At present, far too many recipients are playing the system (enrollment rates have skyrocketed in tandem with easier eligibility).

As a concluding side note here, I oppose those who claim that the best way to bring solvency to Social Security is by increasing the earnings cap for payroll taxes. Instead, I believe that doing so would raise marginal tax rates too high and cause significant net damage to the economy.

3) Reform Medicaid

The dramatic expansion of Medicaid under Obamacare has meant a massive new entitlement burden. To reduce costs, we must devolve Medicaid responsibility to the states. Moving away from the absurdly centralized bureaucracy that currently provides for Medicaid payments, the federal government should provide block grants to the states. That will allow each state to determine eligibility, treatment and payment plans. Bringing much needed scrutiny, this reform would empower citizens to determine what they want state governments to provide. It would also force cities like Chicago and states like California to reduce inefficiency. As health care expert John Davidson has noted, these reforms have the potential to save hundreds of billions of dollars while protecting services for baseline recipients. As a final extension here, we need more aggressive prosecutions to fight the expensive endemic of Medicare, Medicaid and Social Security fraud.

­­Ultimately, when it comes to entitlements, we have a choice as a people. Do we wish to leave the nation in better health or worse health? Are we happy for America’s best days to lie behind us? These questions are existential. If we fail to reform entitlements, we will embrace a future of perpetual debt. Some will always pretend that the debt doesn’t matter, but the opposite is true. Rather than tinkering around the easy edges, we must get serious about entitlement reform.

Tom Rogan is a foreign policy columnist for National Review, a domestic policy columnist for Opportunity Lives, a panelist on The McLaughlin Group and a senior fellow at the Steamboat Institute. Follow him on Twitter @TomRtweets.