Why Medicare Must Be Reformed, in One Chart


Over at National Review's The Corner, Reason columnist and Mercatus Center economist Veronique de Rugy has generated a terrifying chart that neatly explains why the country's single-payer health-care system for the elderly is poison to our fiscal future.

Writes de Rugy,

Between 1975 and 2011, the number of Medicare enrollees doubled to 48 million, and the real cost per enrollee quintupled. By 2040, the Trustees calculate, the program will consume almost 6 percent of GDP (see pg.213), the cost will be nearly $21,000 for one beneficiary, and Medicare will cover about 88 million people. 

More here.

The chart is based on the latest trustees report and Congressional Budget Office data.

Sadly—and despite mutual invective to the contrary—neither the Dems or the Reps have any real plan for cutting Medicare spending down to size.

No one with half a brain seriously thinks that even if Obamacare goes through exactly as planned that we'll be spending less on seniors anytime soon (read: never, especially as baby boomers start the great migration toward their dotage).

It's extremely unlikely that Paul Ryan's premium-subsidy voucher would have restrained spending (the political dynamics toward higher spending remain the same as those under traditional Medicare) but it's a moot point. Romney and Ryan are pushing a hybrid plan which essentially relies on government negotiation with insurers to cover the elderly at low, low rates. Good luck with that.

In the August-September issue of Reason, de Rugy and I suggest a far more radical approach: Not reforming Medicare or folding it into a larger, sure-miss health care reform but abolishing not just the program but the very idea of "old-age entitlements."

Simply put, there is no fiscal case for continuing Medicare or Social Security. Each in their own way is unsustainable. Social Security is already paying out negative returns to all recent and future retirees while relying on shrinking numbers of contributors. Medicare pays out far more to everyone than anyone puts in. Read the article for details.

As or more important, there is no moral case for continuing either program. By design, they shift money from relatively young and relatively poor workers to relatively old and relatively wealthy retirees, thereby reversing the natural order of civilization. If the government is going to support needy citizens, let it do so based on actual demonstrated need rather than an arbitrary age limit that doesn't seriously account for accumulated wealth. 

You won't hear this sort of argument at this week's Democratic National Convention any more than you did at last week's Republican National Convention. But lest ye think actually scrapping the two biggest federal transfer programs is politically unfeasible, rest assured that brutal economic realities will wreck these programs sooner or later.

And the critique that they are endangering the ability of the state to provide for its poorest and most infirm citizens has a ring of moral clarity to it that vague appeals to sacred generational compacts and debts we owe to our parents and grandparents just can't muster.