Wither Medicare?

Newt Gingrich jeopardizes reform by exaggerating small differences.

In 1995, when he was speaker of the House, Newt Gingrich told a gathering of Blue Cross/Blue Shield executives that he and his fellow Republicans planned to present "a free-market plan" that would compete with Medicare and ultimately drive it out of business. "We believe it's going to wither on the vine," he said, "because we think people are voluntarily going to leave it."

Ever since then, Gingrich's critics on the left have been citing that comment to portray him as a hardhearted ideologue bent on tearing up the social safety net. Gingrich, who last week announced he is running for the Republican presidential nomination, is so eager to shed this image that he is willing to endanger Medicare reform by bad-mouthing a plan that by his own account is very similar to his own.

During a Meet the Press appearance on Sunday, Gingrich condemned House Budget Committee Chairman Paul Ryan's proposal to transform Medicare from an open-ended entitlement into a means-tested premium support system. Gingrich called this plan, which was endorsed by all but four House Republicans last month, a "radical change" that amounts to "right-wing social engineering."

Although Gingrich insisted that Ryan's plan is "too big a jump," it would not take effect for a decade. Furthermore, its impact would be gradual, with plenty of time to see whether the health insurance subsidies Ryan envisions are generous enough to cover medical care for retirees who otherwise cannot afford it.

The only alternative offered by Gingrich during the interview—rooting out fraud—is plainly inadequate to address Medicare's looming collapse. He said eliminating fraud might save something like $100 billion a year, or "almost $1 trillion over a decade."

That may sound like a lot. But according to a report released last Friday by Medicare's trustees, the difference between the benefits promised by current law and the money available to pay for them amounts to $25 trillion during the next 75 years, when Medicare's share of GDP will rise from 3.6 percent to 6.2 percent.

The outlook may in fact be much worse, since the trustees' projections are based on highly unrealistic cost-saving measures included in the Patient Protection and Affordable Care Act. "The actual future costs for Medicare are likely to exceed those shown by the current-law projections in this report," the trustees warn. Medicare's chief actuary concurs that "the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range…or the long range." According to the more plausible "illustrative alternative scenario," Medicare's share of GDP will be nearly 11 percent in 2085.

Another way the trustee report, daunting as it is, fails to communicate the full fiscal fiasco: It says Medicare's hospital insurance "trust fund" will be "exhausted" in 2024, five years earlier than projected in 2010. But since the trust fund consists of Treasury bonds that can be redeemed only with taxpayer money or additional debt (which means more taxes in the future), the more relevant date is 2008, when the hospital insurance program started spending more than it takes in and therefore began draining money from the rest of the budget. The Congressional Budget Office projects that Medicare's share of federal spending, currently 12 percent, will double by 2035.

Although Gingrich opportunistically complained last year that Democrats planned to "cut Medicare," he understands that the program in its current form is unsustainable. In fact, after he trashed Ryan's plan on TV, his spokesman, Rick Tyler, told The Weekly Standard "there is little daylight between Ryan and Gingrich" on this issue.

When Gingrich called Ryan's plan a "radical" form of "right-wing social engineering," Tyler said, he merely meant that the failure to include a Medicare-like option along with a choice of private insurance plans was "a political mistake." Gingrich's over-the-top exaggeration of small differences, which provided heavy ammunition to opponents of reform, may prove to be a bigger one.

Jacob Sullum is a senior editor at Reason and a nationally syndicated columnist.

© Copyright 2011 by Creators Syndicate Inc.