Ponder a basic question: Should government officials punish Americans merely because they want to spend their own money on their own health care, or purchase their own health insurance as an alternative to a government health program?

The question has special relevance for retirees eligible, or soon to be eligible, for Medicare, the huge government health program that serves senior and disabled citizens.

The reason: Today, if a retiring senior does not wish to enroll in Medicare, but would rather purchase her own private health plan, the federal government would force her to give up her Social Security benefits also.

Remarkably, this policy doesn’t flow from any explicit act of Congress, but from a regulation initially promulgated by the Social Security Administration and subsequently upheld in federal court litigation. The status quo inflicts a severe penalty on a retiree merely for exercising personal choice in health care, and amounts to a gratuitous restriction on Americans’ personal freedom.

A Bizarre Policy

This policy is bizarre on at least two levels.

First, as a procedural matter, Congress, not the federal bureaucracy, should decide whether a Medicare beneficiary should lose or retain his Social Security benefits if he opts out of Medicare Part A.

Such a grave matter should be addressed through legislation by elected lawmakers, not administration by unelected bureaucrats. Congress, and Congress alone, should clearly determine the terms and conditions of Medicare enrollment or disenrollment.    

Second, as a substantial matter, Medicare and Social Security are distinct entitlement programs. While Medicare eligibility is linked to Social Security eligibility in law, the two programs serve very different functions.

There is no necessary or logical relationship between how or why a person saves and finances (through taxation or pension funding) retirement and how or why a person provides for his or her personal health care.

With health care, personal medical needs and preferences vary greatly. Hopefully, with continuing advances in biomedical research, American health care will continue to evolve and meet a robust popular demand for more personalized medical services.  

The Cruz Option

 To expand seniors’ health care choices, Sen. Ted Cruz, R-Texas, recently introduced the Retirement Freedom Act. The bill is simple: It would allow any senior who wanted to purchase a private health insurance plan and opt out of the traditional Medicare program to do so, while retaining Social Security benefits.

The Cruz bill also would allow a senior to opt back into Medicare, if she wished to do so, without penalty and in accordance with “a process” to be determined by the secretary of the Department of Health and Human Services.

The Cruz bill would not change Medicare financing in any way. As a practical matter, it would affect enrollment in Part A, the hospitalization program. Today, Part A enrollment, like the funding, is mandatory.

The bill simply would allow seniors to forego the hospitalization benefits they paid for through payroll taxes during their working lives if they decided, for personal reasons, to buy a better set of health benefits offered through a private health insurance plan.

Medicare Part B, the part of the program that pays for physicians’ services, is already voluntary. No one is required to enroll in Part B.

Today, it is difficult to say how many persons would decide to opt out of Medicare and buy private health insurance coverage.

Future Options

Tomorrow, it is likely to be a very different story.

In 2018, the Medicare trustees reported that the program faces grave financial problems, and their severity will increase with the passage of time. In 2026, the trustees report, the Medicare Part A (hospitalization) trust fund, already running cash deficits, will become insolvent, meaning that Medicare will not be able to pay for all of the promised hospitalization benefits.

On top of these more immediate Part A problems come the accumulating negative impact of Obamacare’s payment reductions, amounting to $802 billion over 10 years, cuts that primarily target Medicare Part A programs. Medicare payments already fail to cover the costs of treating Medicare patients at hospitals and other facilities.

Based on a more realistic future policy scenario than a static estimate of current law, the Medicare trustees’ report: “By 2040, simulations suggest that approximately half of hospitals, roughly two-thirds of skilled nursing facilities, and over 80 percent of home health agencies would have negative total facilities margins, raising the possibility of access and quality-of-care issues for Medicare beneficiaries.”  

For seniors confronted with Medicare access or quality problems, Cruz has a commonsense solution: Expand their personal freedom.