The Medicare Monster

A Cautionary Tale

Steven Hayward & Erik Peterson from the January 1993 issue

(Page 5 of 5)

Under a universal "all payer" health-insurance policy, the Medicare price-fixing policy would be applied to the entire health-care system. The fears the AMA expressed at the time of Medicare’s enactment 25 years ago that it would lead to socialized medicine seem fated to be realized.

As the nation barrels toward some kind of universal healthcare policy, there is an ominous political parallel shaping up between 1965 and 1993. What finally tipped the balance in favor of Medicare in 1965 was the huge turnover in Congress. The next Congress will have more than 100 new House members. Despite some losses, the Democrats will have a solid majority, and even some Republican congressional candidates adopted as boilerplate the slogan that the federal government must take a role in providing some kind of universal health coverage. Bill Clinton has vowed to make health care a top priority, and Congress isn’t likely to hesitate much over the legacy of Medicare.

In light of the alarming actuarial projections for Medicare’s hospital-insurance program, it is no wonder that politicians are loathe to propose a national health plan that explicitly includes a new payroll tax. But the halfway house of "play or pay" that Democrats are advocating will quickly fall into the same trap as Medicare.

First, Medicare is simply one example of the fact that, as an HCFA official put it, the federal government "continually underestimates the cost of social insurance programs." This problem would be compounded under a "play or pay" scheme because the alternative payroll tax would initially be set low to entice participation.

As a consequence, the government would end up with a disproportionate share of high-cost enrollees (similar to what has happened with the state-run "assigned risk" pools for auto insurance) because companies with high health-insurance costs would find it to their cost advantage to dump the burden onto the government program. Thus, the "pay" portion of the government program would certainly be underfunded. ‘It is guaranteed to increase the federal deficit," says a source at the HCFA. "It is impossible to set a payroll tax that will cover the cost."

A recent study by the Urban Institute found that if the payroll-tax rate of a "play or pay" policy were set at 7 percent, 112 million nonelderly people, or 52 percent of the insured population, would be covered through the "pay" option. This number includes 59 percent of all private-sector workers. If the rate is 9 percent, an estimated 84.8 million would still be enrolled in the public plan, or 39 percent of the nonelderly insured population. These numbers suggest it will be a massive, and massively underfunded, program.

Providing significant funding through cost containment is equally chimerical, unless the government is prepared to administer an onerous "all-payer" regime of price controls on the entire health-care system, and then employ a rigorous scheme of rationing on top of that. Although a few liberals speak openly of price controls and ‘all-payer" regulations, they are loathe to entertain the necessity of rationing because of the inequities it would generate.

There is one decided difference between the politics of Medicare in 1965 and today. In 1965, all the opponents of Medicare had to offer was a watered down version of that program, Medicare on the cheap. Today, opponents of increased federal involvement in health care have a true market-based alternative to offer. The combination of "Medi-save accounts," in which people would be encouraged to save their own money for health insurance and direct payment of medical expenses, and tax credits to enable low-income families to purchase health insurance, offer a viable alternative to centralized big-government health insurance portion of Medicare

Although this isn’t the magic answer to soaring health-care costs, it is a policy that rests on the one proven strategy for holding costs down: making the individual responsible for first-dollar costs of health care. If the critics can portray the issue as big government versus individual empowerment, there just might be a chance for positive reform of the health-care mess.

Comments

Pingback| 11.18.09 @ 4:58PM

Would You Buy Insurance From This Man? « Left Coast Ledger links to this page. Here’s an excerpt:

…saying will be $1 trillion on the initial bill. Let me make this clear: the CBO nor any other government agency has ever even come close to correctly estimating the cost of any major government program. Medicare was supposed to cost $10 billion in 1964. The estimate was projected well into the 1990s. Wilbur Mills was the miscreant who ramrodded the bill through the House for LBJ. You’ll remember Wilbur as the…

Pingback| 12.15.09 @ 10:42PM

The Medicare Monster: A cautionary tale revisited. « The Western Experience links to this page. Here’s an excerpt:

…better to quantify the story to give it teeth. Let’s take a look at the Medicare narrative–as it was proposed in 1965 by Liberals–and what the reality has become. From Reason Magazine, January 1993 issue. Reason Magazine-The two primary lessons of Medicare are the chronic problem of woefully underestimating program costs and the impossibility of genuine cost control. A closer look at Medicare shows why…

Pingback| 1.6.10 @ 11:21AM

TAKEbackMEDICINE.org » Blog Archive » Look What Massachusetts Has To Say About HCR!! links to this page. Here’s an excerpt:

…reduced freedom for individuals – will make medical care harder to come by: an Economics 101 lesson in the pitfalls of price controls. There’s more: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year. Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 1.6.10 @ 11:27AM

Mayo clinic decided to stop accepting Medicare « Harmony Health and Wellness links to this page. Here’s an excerpt:

…and abuse. The program’s long-term deficit is a staggering $38 trillion. Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to an estimated $453 billion this year. Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it…

Pingback| 1.6.10 @ 2:22PM

Obama Says "Look at the Mayo Clinic" - Political Forum links to this page. Here’s an excerpt:

…to fraud and abuse. The program’s long-term deficit is a staggering $38 trillion . Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year . Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 1.7.10 @ 9:04PM

Photomaniacal » Blog Archive » Medicare and the Mayo Clinic links to this page. Here’s an excerpt:

…to fraud and abuse. The program’s long-term deficit is a staggering $38 trillion. Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year. Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 1.8.10 @ 4:17AM

Real Change- Rebuild American Manufacturing « Speaking of Precision Blog links to this page. Here’s an excerpt:

…Let’s look at the history of Medicare as an example of government run healthcare.  The following excerpt is from an article written in 1993 by Steven Hayward & Eric Peterson title “ The Medicare Monster, A Cautionary Tale ”. “The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12…

Pingback| 2.9.10 @ 2:28PM

Yes, Mr. President, there are other health care plans…if you REALLY want to listen links to this page. Here’s an excerpt:

…solution.  Why can’t they do this before passing ANY health care overhaul?  Do they fear that it WOULD bring down costs and, as a result, eliminate the need to grow the size of government? ( The Medicare Monster ) Why is TORT reform totally absent from both the House and Senate health care bills?  Is it because of the amount of money provided to the majority party by the special interest groups representing…

Pingback| 2.25.10 @ 2:47PM

Medicare working so great, doctors are threatening to drop more patients - Politics a links to this page. Here’s an excerpt:

…abuse. The program’s long-term deficit is a staggering $38 trillion . Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year . Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 2.25.10 @ 2:48PM

Medicare working so great, doctors are threatening to drop more patients - Politics a links to this page. Here’s an excerpt:

…abuse. The program’s long-term deficit is a staggering $38 trillion . Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year . Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 2.25.10 @ 5:27PM

Medicare working so great, doctors are threatening to drop more patients - Politics a links to this page. Here’s an excerpt:

…to fraud and abuse. The program’s long-term deficit is a staggering $38 trillion . Its expenditures have raced ahead of inflation from the day it was created: Medicare’s price tag has skyrocketed from $3 billion in 1966 to $453 billion this year . Yet its reimbursement of medical providers is so meager that more and more of them cannot afford to treat Medicare patients. Whatever else Medicare might be, it is no model…

Pingback| 3.2.10 @ 3:22PM

» New Government Programs Always Cost More Than Predicted - Big Government links to this page. Here’s an excerpt:

…wrong. And it’s always wrong by underestimating the cost. Why don’t the Republicans point this out? (Probably because they’ve been big government spenders, too.) Look back at when Medicare was first created: At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for…

Pingback| 3.20.10 @ 1:04AM

Did this guy actually read it? - Page 3 links to this page. Here’s an excerpt:

…billion over the 2004-2013 period. That is an increase of $41 billion over the original $552 billion estimate of net Medicare spending for Part D How about the original Medicare estimates? The Medicare Monster - Reason Magazine Quote: The two primary lessons of Medicare are the chronic problem of woefully underestimating program costs and the impossibility of genuine cost control. A closer look at Medicare shows why…

Pingback| 3.21.10 @ 11:33PM

OpinionEditorial — Blog — Beware the Fury of a Patient Man links to this page. Here’s an excerpt:

…still uncertain. In fact, no one knows what ObamaCare will cost. The bill consists of 2500 pages of dense legalese, plus thousands of pages of regulations yet to be written. ● What is certain is that, like Medicare, it is sure to cost more than early estimates. ● What is certain is that if illegal immigrants are included in ObamaCare, as seems likely despite the president’s promise, costs will be even higher. ● What is…

Pingback| 3.22.10 @ 3:18PM

What’s Really Bad About the Bill « the Global Observatory links to this page. Here’s an excerpt:

…spending a pretty 1.4 trillion dollars per year on average more than we have. $940 billion will only add to that. Moreover, government cost estimates almost always prove to be far short of the actual number. Medicare, for instance,: … in 1966 cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation).…

Pingback| 3.23.10 @ 8:50PM

Health Care Passed, A serious question about the past. links to this page. Here’s an excerpt:

…only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion. The Medicare Monster - Reason Magazine __________________ 1988 FJ62 on 33s 1996 LX450 on 33s   Bookmarks Facebook Google Twitter del.icio.us MySpace Yahoo Digg StumbleUpon aster_cloud_id = '2425741'; aster_cloud_format =…

Pingback| 3.24.10 @ 7:51AM

William M. Briggs, Statistician » Democrat’s Appalling Budget Wishcast links to this page. Here’s an excerpt:

…For example, meteorologists often exaggerate the chance for snow on The Federally Recognized Holiday of December 25th. Where does the wishcasting come in with Obamacare? Consider Medicare. In 1966, Congress forecast that by 1990 it would cost $12 billion (adjusted for inflation). It actually cost $107 billion. This is nine times higher. A similar story is had for Social Security, Medicaid, and every other…

Pingback| 3.26.10 @ 3:40PM

The True Prescription for Medical-Care Reform Is A Freed Market « The Freeman Chronic links to this page. Here’s an excerpt:

…fiction. Medicare, which was launched in 1966, actually cost $3 billion. Congress projected the costs of the program at about $12 billion by 1990 (an alleged conservative estimate). By the time that year came, the actual cost was $107 billion (if inflation is included in the costs). In 2003, the CATO Institute issued a report indicating that the program was going to be price-tagged at a projected $244 billion. Moreover,…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…as I know, that double-counting is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion.…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…I know, that double-counting is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:16AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that…

Pingback| 3.29.10 @ 1:17AM

Political News Highlights and Controversy» Did The CBO Report Double Count Medicare D links to this page. Here’s an excerpt:

…is still happening. What’s more, ask yourself what government estimate of costs has ever been accurate? Take Medicare for instance: The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee…

Pingback| 3.29.10 @ 8:40AM

If You Can Find A Path With No Obstacles It Probably Doesn’t Lead Anywhere « Finding links to this page. Here’s an excerpt:

…What history tells us is that the costs associated with the new legislation will be substantially higher than anticipated.    Consider that when Medicare was established the anticipated cost in 1990, when adjusted for inflation, was to be $12 billion dollars but ended up costing $107 billion.  Extrapolating what has occurred with Medicare exponentially is what businesses are considering today.   The recently passed…

Pingback| 3.31.10 @ 10:18AM

The Glenn Beck Boycott Gaining Traction - FOX News Losing Money - Page 60 links to this page. Here’s an excerpt:

…costs of a bankrupt program in your world. Doesn't matter to you, does it? The misinformation is coming from supporters not detractors and the detractors have history on their side. http://reason.com/archives/1993/01/0...dicare-monster Last edited by Conservative; Today at 09:14 AM.   Today, 09:16 AM   # 597 Boo Radley Professor     Join Date: Dec 2009 Last Seen: Today 09:18 AM Posts: 2,253…

Pingback| 4.4.10 @ 12:39AM

Farmer Barrack And His Crop Of “Cabbage” « RoadSideSatire.com links to this page. Here’s an excerpt:

…Lyndon’s” cabbage cost numbers are real and are taken from actual estimates used for the projected 25-year cost of the 1965 Medicare bill passed by President Lyndon Johnson, as reported by Reason.com.  “Farmer Barrack’s” cabbage cost numbers are also real, as far as they go, and represent the estimated governmental cost of Health Care Reform over 10 years as calculated by the…

Pingback| 4.6.10 @ 12:52AM

U.S. Supreme Court to strike down Obamacare - Page 5 - US Message Board - Political links to this page. Here’s an excerpt:

…only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion. The Medicare Monster - Reason Magazine I just can't see that when confronted with facts, the left simply ignores them and continues to bang the drum Obama tells them to bang. Sponsored links Remove advertisements US Message Board -…

Pingback| 4.24.10 @ 12:25PM

Another Obama lie. New Report. Obamcare will raise - Page 2 - US Message Board - Pol links to this page. Here’s an excerpt:

…$ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion. http://reason.com/archives/1993/01/0...dicare-monster That underminds YOUR argument. The government does not have a great reacord when it comes to accurate projections. __________________ Guird up Conservatives! Don't reform or rebrand…

Pingback| 4.28.10 @ 9:07AM

State Policy Blog » Blog Archive » Breaking Down Obama’s Debt Commission links to this page. Here’s an excerpt:

…will look like in four, five, and ten years, that it really is somewhat disingenuous to make a hard claim on that piece of legislation fitting this standard. Given the fact that Medicare now costs about 1000% more than was estimated when it passed in 1966, it is not hard to believe that ObamaCare could also get out of hand. All that to say, Mr. President, I appreciate your desire to control spending with this…

nfl jerseys|11.26.10 @ 8:22PM|#

jsxth