Human Events Blog

Medicare trustees warn of entitlement Armageddon

On Monday, the Medicare trustees released their latest report on the financial status of the program which our Democrat Party, shouting in unison at the top of their lungs, assures us is perfectly sound and requires no significant reform.

Good news!  As Reuters reports, Medicare “should be able to stave off insolvency for the next 12 years, depending on a number of financial and political assumptions that may prove unrealistic.”

Well, that’s long enough to get Barack Obama re-elected, and what else really matters?

What are those potentially unrealistic financial and political assumptions?  Oh, just little stuff like doctors taking a 31 percent pay cut, the U.S. government marshalling the political will to cut Medicare spending by 2 percent annually for the next decade, and the Supreme Court leaving ObamaCare intact.

The doctor pay cut is especially problematic, as it could accelerate the already dismaying rate at which doctors are refusing to take Medicare patients, and ultimately reduce our supply of trained doctors.  And as we all know, the laws of supply and demand say that when a given commodity is too expensive, the best thing you can possibly do is reduce supply.  At least, a lot of our elected officials seem to believe that.

The Heritage Foundation notes that, under the doctor pay cuts imposed by ObamaCare, Medicare reimbursement rates “will start to dip below Medicaid levels by 2019,” and Medicaid payments are notoriously stingy.  In the extremely likely event that doctors get a break in those pay cuts, to prevent doctors and hospitals from closing their doors to seniors, Medicare will drop dead even sooner… possibly as early as 2017, according to the trustee’s worst-case scenario.  Yes, 2017.  That’s five years from now.

The current unfunded liability for Medicare – the cost of keeping all the promises our federal government has made – is $38.6 trillion over the next 75 years, which is 4.3 percent of our entire Gross Domestic Product.  The rate increases more steeply as costs explode, exceeding 6 percent of GDP by 2040.  Not long after that, the combined cost of Social Security, Medicare, and Medicaid will consume all federal income, leaving not a nickel for discretionary spending, defense, or anything else at all. 

CNS News did the math and came up with a Medicare burden of $328,404.43 per household.  Funding that liability through tax increases would drop over sixty billion dollars per year in new taxes on the American people.  That’s a 47 percent increase in Medicare payroll taxes!  Heritage describes this as “levels of taxation for all Americans unlike they have ever seen, reducing disposable income for younger families, small businesses, and capital investment.”

As you evaluate the latest fashionable offerings from Big Government snake oil salesmen, remember that when Medicare began in 1965, it was projected to cost no more than $12 billion by 1990.  The actual cost worked out to $110 billion.  If a time traveler could zip back to 1965 with a copy of this week’s Medicare trustee report, everyone who advocated the program would have been laughed out of office.  Correction: they would have been denounced as irresponsible lunatics and driven out of office.

The trustees offered essentially the same schedule for Medicare meltdown last year, but in the latest report they bumped the date of Social Security collapse forward by three years, to 2033.  These are no longer remote horizons.  Medicare insolvency could be only two presidential elections away.

Here’s a little-known fact about Medicare: when the trustees warn of impending fiscal collapse, the President of the United States is required, by law, to submit a solid proposal for making the program solvent within 15 days of turning in his annual budget proposal.  This is another one of those laws politicians simply ignore, like the one requiring the Senate to produce a budget for the federal government.

After digesting the new trustee report, Rep. Tim Huelskamp (R-KN), who serves on the House Budget Committee, said in a statement:

“The warning alarm gets louder and louder, closer and closer every year, yet too many in Washington – especially President Obama – still cover their ears.  We have known for many years that the ‘tipping points’ of Social Security and Medicare are looming right around the corner – in fact, perhaps as early as 2017 – yet somehow the search for a solution is overlooked. Current and future retirees have an expectation that these programs will be around when they need them; either we need to do something to fix these programs, or put an end to the charade that nothing is wrong.”

“President Obama has not only a moral responsibility, but a legal obligation to offer a solution. When Medicare Trustees issue a funding warning – as they have done for the past six years – U.S. Code requires that the President submit a legislative fix within 15 days of presenting his budget. To date, President Obama has neglected his fundamental responsibility to America’s seniors.”

Rep. John Fleming (R-LA), who is a medical doctor, wondered if the new report would inspire “President Obama and his liberal allies” to “get serious about entitlement reform”:

“The Trustees’ projections show a shortened lifespan for Social Security and sound another urgent warning that Medicare is spiraling toward a crisis. The president’s Trustees also claim that Obamacare is somehow extending the life of Medicare. That idea would be laughable if the health care of millions of seniors was not at stake. The president already took money away from Medicare savings to foot some of the massive bill for Obamacare.

“The population is aging and health care costs are rising. Obamacare failed to address those issues and that means Medicare is still facing insolvency. It’s time for the administration to stop spinning its do-nothing approach and finally recognize that Medicare is on an unsustainable path. I and my fellow House Republicans continue to offer meaningful steps toward Medicare reform while Washington liberals have little to offer but more posturing and name-calling.”

It always seemed to me that the fundamental problem with health care is that people don’t pay money for it.  It’s purchased through an exotic medium of exchange, in which money from individuals is fused with nebulous “contributions” from employers and the government, then laundered through the medium of health insurance, which really isn’t “insurance” any more. 

That’s part of the problem – the very language we use to discuss health care has been stripped of all meaning.  Medicine itself employs a great deal of complex terminology, but at least doctors agree on what the words mean. 

Now we find ourselves reading trustee reports that come stamped with rapidly advancing doomsday clocks, making it perfectly clear that our entitlement programs are unsustainable – but we are still obliged to pretend they’re something other than titanic mountains of liability.  We approach the day when there is, quite literally, not enough money in the world to cover them.  That’s another aspect of separating medicine from money.  It is delusional to claim “ownership” over something we cannot possibly pay for.

Anything that further separates doctors from patients, customers from insurance providers, and health care from currency will make the problem worse.  Anything that brings them closer together will be an improvement.  The American people are remarkably ingenious about finding ways to pay for something they want… provided they know what it really costs.

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