Medicare headed for a cliff
The L.A. Times reports that Medicare is in frighteningly bad shape. Again.
The huge Medicare fund for inpatient hospital care will not be able to cover the full amount of billings beginning in 2018, two years earlier than estimated last year. The Medicare fund has been in dire straits before — as recently as 1997 it was only four years from insolvency — but with 78 million baby boomers about to become eligible for benefits, the challenge now is far greater.
Medicare now comprises three programs: Part A, which covers inpatient hospital costs; Part B, which pays for outpatient costs and doctor visits; and now Part D, the prescription-drug benefit. Part A gets its money from a trust that’s funded by payroll taxes. Part B’s money comes largely from general tax revenue. And Part D is funded by a combination of general revenue and premiums paid by participants in the program (assuming anyone signs up).
The Bush-backed 2003 Medicare law that added the prescription-drug benefit also included a peculiar rule regarding how the program’s solvency is calculated. The Center on Budget and Policy Priorities explains:
Under a provision of law enacted as part of the 2003 Medicare prescription drug bill, the annual Medicare Trustees’ report is required to include an estimate of the year in which general revenues will account for more than 45 percent of Medicare funding. If the projections in two consecutive trustees’ reports indicate that this portion will exceed 45 percent within the next six years, the President is required to submit legislation to reduce the portion to less than 45 percent. In his latest budget, President Bush has proposed amending this provision to require automatic cuts in Medicare every year once the 45-percent point is reached.
As CBPP’s report on “the 45-percent trigger” argues, this rigs the system so that fixes involving funding increases from the general revenue (progressive taxation) become almost impossible. This leaves cutting expenditures (as Bush suggests) or raising payroll taxes (regressive taxation). With health-care costs rising across the board, and a pricey prescription-drug benefit sapping Medicare’s coffers, how much longer before the system buckles?
What’s the end game here, do you think?
I had an interesting discussion with my students about this very topic recently.
I said, only partly to be provocative, that euthanasia of the elderly was going to start looking mighty good about 2030, as huge numbers of Baby Boomers slid into incontinence and dementia.
There was a moment of wheel-turning silence, and several students started to consider this quite seriously. Wouldn’t it be kinder to let people die than go to The Home, especially if you’re basically “out of it” anyway?
Young people don’t have a lot of love lost for us Baby Boomers. The Summer of Love is long gone. Our generation is running the country now, pretty much along the lines of the Nixon administration, complete with wiretapping, blah blah about peace with honor, and endless arguments over who “the deserving poor” are. All the while running up the national debt.
These kids may love their parents, and want, in a general way, to do right by them. But they have a lot of ambivalence about the Baby Boom generation in general.
We still cut them out of the good jobs, dominate the consumer market, and they worry that they won’t be able to command the same standard of living they grew up with.
Some of them, of course, have found a way around that dilemma: Credit cards! Debt among college kids has become endemic.
Our class discussion made me suspect that younger people won’t have the will to support us en masse at the level of care our parents received. Neither will they have the means if the level of personal and national debt continues unabated.
These kids have their own worries. If we want a brighter future for the elderly, which will soon be us, we’ll have to figure it out for ourselves.
Medicare was always a bad idea, and the fact that it is about to collapse only surprises those who have idea how prices work. What do you expect when you insulate an industry so thoroughly from the rigors of the market?
The way to salvage Medicare is the same way to salvage a ship that has run aground: you strip it for parts.
But just because the government should get out of healthcare does not mean that people should be without health care. What it means is that private organizations (the Church especially comes to mind here) ought to step into the gap and provide health services to those who cannot afford it. It would solve nearly every problem: because it would be privately run, and on a limited budget, the money that would be available would be used much more efficiently. Moreover, those who donated for medical care would actually be engaging in charity: rather than being robbed of their earnings and having it squandered by a massive beaurocracy, they would be able to both invest in their local communities and see their donations at work directly. Also, the prohibitive costs of prescription drugs right now would cease to become prohibitive: either the drug companies would figure out a better and cheaper way to make the same product, or they would go out of business. Everybody wins: taxpayers pay less, the Church grows more into it’s role of looking out for the widow and the orphan, and drugs get cheaper for the not-so-poor as well.
What makes you think “the church” will run health care better than the government? Why should a donor see the direct effects of his charity? Why would the church be better able to negotiate drug prices than would the government? Why not go out of business rather than suffer losses? Why was Medicare a bad idea? Because privately run is always better than publicly? Enron much? This smells like GOP personal-virtue fantasy. Everybody wins!
Carl makes it all sound so simple: Quit taxing people for Medicare, and they’ll be able to save more money for their own health care and give more to charities that will give it to poor people.
That line of thinking is predicated on a level of personal financial prudence and generosity that I just don’t see in our American culture, not with credit card debt as high as it is and not since tax deductions for charitable giving were virtually wiped out for the middle class..
The amount of money we’d save each year if we were not taxed for Medicare would just about cover insurance for our family, barring any increases in premiums. Sadly, however, premiums are going up at a rate that exceeds most COLA raises, so it wouldn’t be too many years before we couldn’t pay our premiums.
Carl’s line of thinking is also predicated on churches being in better financial shape than many of them are. Our parish has been running on a deficit for years, kept afloat only by dipping into its savings and running ever more Texas Hold’em tournaments and fish fries.
I’m guessing that if the church suddenly experienced an influx of donations, it would spend most of it, at least for a few years, getting itself back on track financially.
What Carl doesn’t address is the fact that Medicare is just one component of the growing health care crisis in the nation.
My brother is self-employed and under insured. When he was seriously injured in an accident, he and his wife sold his home to supplement their insurance so he could have orthopedic surgery. He and his wife made the best of it and are living in a small apartment above his shop.
A childhood friend died of lymphoma and exceeded the limits on her health insurance halfway through the disease treatment. Her husband, with five children at home. Their church threw spaghetti suppers and other events to try to help with the bill, but the husband finally filed for bankruptcy because the bills were just too much.
Another friend died recently of ovarian cancer. When her insurance reached its limit, she opted to stop treatment rather than leave her family with a large debt. Her husband is still paying off hospice care out-of-pocket.
Having been uninsured in the past, I can tell you that there are hundreds of option out there. Market forces are alive and well in the health insurance sector. And they are making lots of money.
Here’s how they do it: You generally have to buy into a high premium/high deductible program. You are often required to open a medical savings account with the insurer. This means they not only get your monthly insurance premium, they also get to use your medical savings account money, often without paying you interest.
And, because the insurance biz is more highly rigged than a Las Vegas gaming operation, you generally have to submit detailed medical records, which will lead to exclusions for any existing conditions.
In our case, all treatment for our son’s asthma was nixed by the insurance company. And, anybody who’s got a kid with asthma can tell you that the meds are the single largest montly medical expense you incur.
We manage. But the $300 we pay out-of-pocket for our son’s asthma meds is $300 we cannot save toward retirement.
If Medicare is “dismantled and stripped for parts,” as Car suggests, many working families struggling with their own insurance will experience a double crisis down the road if there is no Medicare to take care of elderly parents.
Both our fathers are in their 80s. One has emphysema and gets weekly in-home care, and the other is in an extended care facility with congestive heart failure. I have no idea how we’d share those costs with our siblings and still manager our own health affairs.
I would be happy to provide Carl with detailed financial information about my family situation, and if he can show me how axing Medicare would save me money, I will be happy to write it all up and post it far and wide.