Skip to comments.Clarity on Medicare
Posted on 08/19/2012 11:11:33 PM PDT by Kaslin
The year 1965 brought us a new program aimed at securing health care for Americans over the age of 65. This program is now becoming the centerpiece of the 2012 presidential campaign, yet many Americans dont understand the basic financial facts about the plan, or why its sustainability is considered so essential to Americas future.
Funded by payroll tax deductions, Medicare was implemented to help pay for medical procedures, hospital costs, and doctor visits. Later a prescription drug benefit was added. Since workers paid for the plan throughout their work years, they naturally felt entitled to this important retirement benefit when they turned 65. Unfortunately, the incoming money wasnt set aside in a separate trust fund, but was instead borrowed by the federal government to pay for other government expenses. Our leaders put slips of paper into the fund equivalent to IOUs. They called them bonds, but elected officials were borrowing the money, just like they now sell bonds to the Chinese.
So now we have what some believe is a crisis. The amounts being paid out by Medicare now far exceed what we are taking in, and reputable analysts agree that the fund will run dry by 2024 or near that time. The reasons are simple:
The population of the United States is aging and many people are living much longer.
Technological innovation has driven up the cost of medicine. Things like MRIs, knee replacements, and heart stents have preserved lives, but cost lots of money.
Third party payments for services. You may not agree with this point, but when a customer doesnt personally pay for a service, there is usually less concern about the price. Because insurance companies and government programs pay for so much health care, people are less diligent about controlling costs.
In 1965, the cost of the Medicare program was projected to be $9 billion in 1990; it was actually $65 billion. Since then, the number has skyrocketed. Medicare spending was about $560 billion in 2011, and is slated to grow to nearly $1 trillion by 2022 an amount generally agreed by both political parties to be unsustainable. There may be a few diehards who dont believe we need a significant change of trajectory, but I havent spoken to them.
Now we have a Vice-Presidential candidate who has come out (before he was selected) with a plan to reform Medicare. You can disagree with his proposal, but you cant disagree with the fact that he has a thoughtful, concrete plan, co-sponsored by Democratic Senator Ron Wyden from Oregon which makes it bipartisan.
Simply put, it does the following:
Anyone over 55 years old wouldnt see any change to Medicare as it is currently constituted.
Anyone younger than 55 would be given an option. Either they could choose a private insurance company (similar to the Medicare Advantage program instituted in the 1970s), or they could enroll in Medicare as a fee-for-service program that would continue to pay directly for care. The difference is they would be given a quantified amount to pay for their insurance where there would be caps depending on financial need.
No one currently receiving Medicare would be affected and everyone else would have a ten- year window to plan for the changes ahead. This may be a perfect plan, a lousy plan or something in-between depending on your perception, but it is a plan to confront the problem.
The President doesnt like to speak of how he has altered Medicare, but his spokesperson, Stephanie Cutter, admitted on Face the Nation that there is a $700 billion cut to Medicare in the Affordable Care Act (Obamacare). She stated that this was a reduction of payments to insurance and drug companies, but they are clearly cuts and they go into effect on January 1, 2013. She also stated that the President plans another $300 billion in cuts in his current plans.
American politicians are afraid of discussing cuts to any program; after all, whenever theres a cut, someone gets less than they currently receive. But many people are also legitimately frightened by our out-of-control budgets at all levels of government, and the realization that we have made future commitments that are completely unsustainable. You may not believe that, but more and more Americans clearly shiver as cities are going bankrupt while were mortgaging our future with annual trillion dollar budget deficits and a national debt of $16 trillion.
The question that we all must face is can either Medicare or Social Security remain sustainable when we have deficits this large? With the national debt ballooning, expenditures for entitlement programs will be squeezed out by interest payments. What happens to these programs when interest rates rise which we all know will have to happen sometime and probably not too long from now?
The President and his allies have confronted the issue, but appear reluctant to say they have. This is made worse by the fact that its unlikely that Congress will ever approve the cuts. After all, for each of the past several years, Congress has approved a bill to adjust (raise) Medicare payments to doctors so that seniors dont scream when their doctors refuse to provide services.
Mitt Romney and Paul Ryan are betting that the American people will not be scared into believing that Medicare is going away. They believe that Americans realize that there is a severe crisis, and that things have to change before were forced to change. And they have faith that seniors understand that even though they wont be personally affected by Ryan-Wyden, changes must be made for the benefit of their children and grandchildren. Time will tell whether they are correct. But let us be clear, Mr. Romney has never adopted the Ryan-Wyden Plan and he is the presidential candidate not Paul Ryan.
You now have the facts in terms as simply as can be stated and hopefully in as unbiased a way as possible. You are smart enough to make your own decision.
There is no “Trust Fund”
There never was a “Trust Fund”
The Trust Funds are nothing but an accounting gimmick and a way to transfer the surplus, when there was a surplus, to the General Fund.
It is not possible for any person to write himself an IOU and take that note to the bank.
You can not sign both lines and have a document that is worth anything.
We can not do it individually.
No corporation can do it.
No government can do it.
Every penny paid out in benefits will come from current tax revenue or current borrowing. The government can not “sell” a bond without getting someone to “BUY” a bond.
The Trust Funds do not increase or decrease the net worth of America by a single penny. They void themselves out. The debit and the credit balance out to ZERO!
Medicare alone has a $90 TRILLION unfunded liabilty:
Speech by Richard W. Fisher, Head of the Dallas Federal Reserve Bank February 10, 2010:
Pundits and analysts like to focus on the year in which Social Security will go permanently into the red on an annual cash flow basiswhich recently was projected to occur in 2019 but could occur as early as 2016. But they largely ignore the severity of the broader problem: accumulated entitlement debt over the infinite horizon.
According to our calculations at the Dallas Fed, that unfunded debt of Social Security and Medicare combined has now reached $104 trilliontrillion with a ‘T’in discounted present value. And while much attention in recent years has been devoted to Social Security, the lion’s share of the total entitlement shortfall (nearly $90 trillion) actually comes from Medicare.
This is a prodigious number. Otherslike Pete Peterson’s foundation, which uses a different time horizon in its methodologycalculate the unfunded liability at north of $40 trillion, growing by a sum of $2 trillion to $3 trillion per year. No matter. The problem is frightful, whether you take his numbers or ours.
Medicare is by far the most serious fiscal storm cloud on the horizon, and it is a storm we are poorly positioned to weather given the rapidly deteriorating medium-term deficit outlook. Yet maintaining economic growth over the long term requires us to do so.
The rate of growth in ALL health care costs has to be reigned in, both public, and private. The US spends more BY FAR per person (again, this includes private) than any other nation on the planet, yet the US is ranked only 37th in overall quality. The insurance companies, big pharma, etc, are charging insanely high levels for the quality of care they provide. Also, malpractice insurance is outrageously high, and the government is forbiden by law from negoiating true scale-of-economy purchases for drugs. The year long 3-drug regimen for Hepatitus C costs the government of Sweden around 5.500 dollars US. The EXACT same drugs cost Medicare/Medicaid in the US over 100,000 dollars. The same goes if you have no insurance and have to buy off the shelf.
Another huge problem is the false claim that US drug companies have to charge so much becuase they spend most of their profits on research and bring new drugs to market. They actually spend almost TWICE on ADVERTISING than R & D. Plus they simply switch a few molecules around on old drugs that would have been able to be sold as low-cost generics, and then go on charging 10 times plus the amounts.
Big Pharma Spends More On Advertising Than Research And Development, Study Finds
Bottom line, it is oligarch/crony capitalism, with the huge firms using big government as both a hammer to smash down any attempts to lower costs, whilst also raping the taxpayers and consumers via the unlimited pig trough of spending.
Well, yes, there was. Until Lyndon Johnson. Who, in 1966, adopted the "unified budget" -- where there had been a "government operating budget" and a "Social Security budget."
"Mah frens...and you are mah frens...at present, we have these two pots of mahney. Now, in this pot, the mahney comes in from income taxes...and goes out over heah in the "operatin' budget". But, in this pot over heah, the mahney comes in from Sosh Security taxes...and goes out to the Sosh Security recipients.
But if we put all the mahney comin' in into jes' one pot, we can affahd to faht both a Wah in Viet Nam and a Wah Agin' Pahvety..."
At that point, I knew we'd been had.
There never was a Trust Fund.
It is not possible.
It is not logical.
It has always been an accounting gimmick.
Great post. It is shameful how much the US spends to get mediocre medical care, but the big money being made with the current system makes meaningful change very difficult.
People like to say they love our system because it is based on freedom, and they don’t want government to interfere with our freedom. They don’t realize that the government has removed freedom almost entirely from the medical care system. You can only get medical advice from a certified doctor, which means he or she must attend a medical school certified by the AMA, which, not surprisingly, limits the number of such schools. As a result, there is no competition to speak of, so prices tend to skyrocket. When I left Austin, Texas in the early 90’s, we (the city) were having to pay neurologists $2,000 a weekend night just to be on call in case there was an emergency that needed their care. Contrast that with the lawyers who fought over who got to answer the Austin Bar Association telephone over the weekend, on the chance of getting a customer. It took six weeks to get in to see an orthopedic. My primary care physician took two weeks, which effectively put him out of the acute care business.
If you want to limit people’s rights to medical treatment to “doctors”, then let’s have enough to have a capitalist, competitive system. Start off by doubling the number of medical schools. Chicken feed compared to the costs we’re talking about for the system the way it is.
I’d go one step further. After traveling around the world a bit, I have noticed that a good part of it sells the basic drugs—antibiotics, heart medication, arthritis, etc...— over the counter at pharmacies. Better to have a doctor prescribe it. Probably so, but often times it’s just a matter of getting the same thing you always use. And if you prefer going to the doctor, fine, just pay for it yourself. I think it’s a good idea to let people with lower levels of training treat patients, give people the choice anyway. If it’s too complicated for them, they can bump them up the system.
In short, let’s get the government out of the business of treating us like small children and regulating our medical industry to the point where it drives us all bankrupt.
Okay, then the DEMOCRATS need to shut up!!!
Who was it that expanded Medicare and Medicaid to cover many, many more people than it was originally designed to cover?
So DEMOCRATS ... SHUT UP!!!
You have no integrity!!!