Medicare's Birthday: A Failed Centralized Program Turns 50

Fifty years ago, President Lyndon Johnson traveled to Independence, Mo., to sign legislation creating Medicare and Medicaid.

Critics of the 1965 legislation warned that both [Medicare and Medicaid] programs would spend much more than supporters predicted, that price controls and rationing of care would follow and that the quality of care would eventually suffer. All of the warnings have proved correct.

In 1965, the House Ways and Means Committee estimated that Medicare Part A, which covers hospital bills, would cost $9 billion a year by 1990. But the actual cost after the first 25 years was $67 billion, and that didn't include Medicare Part B, which primarily covers outpatient costs.

As health economist Theodore Marmor pointed out: "Hospital price increases presented the most intractable political problem for the Johnson administration. In the first year of Medicare's operation, the average daily service charge in America's hospitals increased by an unprecedented 21.9%. Each month the Labor Department's consumer price survey reported further increases . ... In the State of the Union Address, Jan. 17, 1968, Johnson ... promised to 'stem the rising costs of medical care.'"

Today, both Medicare and Medicaid have exploding budgets. Medicare spent more than $600 billion last year. Federal Medicaid expenditures are estimated at $331 billion, with the federal portion averaging about 57% and states and some local governments paying the rest.

In short, it appears the Democrats who passed this massive and convoluted ObamaCare system learned nothing from 50 years of Medicare and Medicaid. Government involvement dramatically increases spending, followed by clampdowns on soaring prices, leading to restrictions on doctors and patients.

Perhaps next time, we might try market forces rather than another failed effort at centralized government programs.

Read it. Forget the Death panels. The real impact will come thru the doubling of the population over 65 over the next 20 years. 10,000 baby boomers retire every day and will continue to do so thru 2030.

Thew SSDI Trust Fund is exhausted next year, 2016. Funds will have to be transferred from the main SSTF urgently.

Social Security’s Disability Insurance (DI) Trust Fund now faces an urgent threat of reserve depletion, requiring prompt corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided. Beyond DI, Social Security as a whole as well as Medicare cannot sustain projected long-run program costs under currently scheduled financing. Lawmakers should take action sooner rather than later to address these structural shortfalls, so that the uncertainty now facing disability beneficiaries will not eventually be experienced by other programs’ participants, and so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.

The DI program satisfies neither the Trustees’ long-range test of close actuarial balance nor our short-range test of financial adequacy and faces the most immediate financing shortfall of any of the separate trust funds. DI Trust Fund reserves expressed as a percent of annual cost (the trust fund ratio) declined to 40 percent at the beginning of 2015, and the Trustees project trust fund depletion late in 2016, the same year projected in the last Trustees Report. DI costs have exceeded non-interest income since 2005, and the trust fund ratio has declined in every year since peaking in 2003. While legislation is needed to address all of Social Security’s financial imbalances, the need has become urgent with respect to the program’s disability insurance component. Lawmakers need to act soon to avoid automatic reductions in payments to DI beneficiaries in late 2016.

To summarize overall Social Security finances, the Trustees have traditionally emphasized the financial status of the hypothetical combined trust funds for DI and for Old Age and Survivors Insurance (OASI). The combined trust funds, and expenditures that can be financed in the context of the combined trust funds, are hypotheticals because there is no legal authority to finance one program’s expenditures with the other program’s taxes or reserves. Social Security’s total expenditures have exceeded non-interest income of its combined trust funds since 2010, and the Trustees estimate that Social Security cost will exceed non-interest income throughout the 75-year projection period. The Trustees project that this annual cash-flow deficit will average about $76 billion between 2015 and 2018 before rising steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Interest income and redemption of trust fund assets from the General Fund of the Treasury, will provide the resources needed to offset Social Security’s annual aggregate cash-flow deficits until 2034. Since the cash-flow deficit will be less than interest earnings through 2019, total income will exceed expenditures and reserves of the combined trust funds will continue to grow but not by enough to prevent the ratio of reserves to one year’s projected cost (the combined trust fund ratio) from declining. (This ratio peaked in 2008, declined through 2014, and is expected to decline steadily in future years.) After 2019, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2034, one year later than projected in last year’s Trustees Report. Thereafter, tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2089.

In short, it appears the Democrats who passed this massive and convoluted ObamaCare system learned nothing from 50 years of Medicare and Medicaid.

It appears that, it is we republicans who have learned nothing form the past 50 years.

Look, you dimwitted republicans, democrats don't care about blowing the budgets, and they don't care that a program could or will go bankrupt. The democrats' goal is to convert the whole economy into socialism. Socialism is what gets them into power and keeps them there. People like 'free' stuff, and Medicare and Medicaid and Social Security and Obamacare, are just a few of the means towards converting the whole economy into socialism.

Forget about whether democrats want to be fiscally responsible with spending. They don't care. They are the party of 'doing whatever it takes', which would include sending the country into recession or a depression. Recessions and depressions, tend to send people into government dependence, when people go begging for protection from going hungry and homeless and clothes-less. Democrats thrive most when people are suffering, and they'll do their utmost to make sure people get into needy situations.

Let's get smart, you dummies!

These rants are interesting but the real danger of Medicare is not that it is a "failure." The real danger is that to the overwhelming perception of the public, Medicare is a success and has become a building block of American life.

To attack medicare now is like Goldwater advocating to privatize TVA in 1964. It was a good enough idea, but a large stationary target for the demagogues. Likewise Medicare, which takes care of almost everyone's grandparents, most of our parents, and many of us.

Remember grandma in a wheel chair being pushed off a cliff? That is the image you need to counter, and you won't do it by offering some erudite sharp pencil accounting and abstract treatise on limited government.

Find and promulgate a good alternative-- please--but don't think for a nanosecond that any politician up for election will want to dump Medicare.

a good alternative

The ONLY real, valid alternative in life is freedom. Freedom is at the heart of this and most issues these days. What you say, which is probably true, is that your run-of-the-mill politician sees no political future in freedom. Of course that makes sense since political freedom is the absence of government and government coercion.

Tremendously valuable and easily lost individual freedom or liberty is being drowned out by the deafening drum beats and bull horns of the Leftist MSM, government schools, government press corps, and politicians grasping for fame, fortune (your money) and power (at the expense of your freedom). The illusion of government-provided security and "equality" seems now to many if not most to be worth the price of individual freedom.

There are very few times in the history of man that a society has lived free for any length of time. Almost all of the history of man is a story of misery and oppression under tyranny. America for about 125 years or so until around 1900, is one such rare example. What we are seeing now is the throes individual freedom being smothered by the relentless march of oppression and tyranny in the temporary veneer of "care" and "compassion and "equality."

The free market economy is freedom in action and is the only source of true wealth as it was for America in the 1800's. I and certain others will always be a freedom fighters even if many or most choose the road to serfdom and darkness as Hayek put it.

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