Election 2012

Why Medicare Must Be Reformed, in One Chart

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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.

NEXT: Gingrich: Bringing Clinton to DNC "Enormous Risk"

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  1. but but but…this ends Medicare “as we know it”, as the left loves to point out. To which anyone else should say, no shit; Medicare as we know it is not sustainable.

    I don’t care what one thinks of Ryan’s plan. At least it is a plan. In a thinking world, those who disagree with Plan A offer up Plan B or make some modifications to A. In short, they do something other than demonize the author of Plan A and hope that people are too stupid to understand that the status quo no worky.

  2. I think the chart should state Medicare Costs to Quadruple by 2040. If the # of enrollees is doubling, and the cost per enrollee is doubling, it stands to reason that the cost of the program as a whole will quadruple.

    1. Stop hating the elderly. You probably hate the children too.

  3. 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.”

    LOL. Yeah that will happen. Old people are most certainly going to vote to cut their own entitlements and young people are most certainly going to want to take on the burden of caring for their parents.

    1. And you can’t even get it accomplished by promising not to cut it for current or even near future beneficiaries. The fucking elderly overlords will always vote against any reform, no matter how far off in the future it is.

      1. The only hope is to promise to keep current benefits and sell middle aged people on cuts as the only way to save the program. That is reality.

        But the Jacket throws a tantrum and screams how anyone who doesn’t want to eliminate the program now is just a big government fake. Then he wonders why no one takes Libertarians seriously.

        1. Red Tony!
          Go! Go!
          Red Tony!

          1. You know the candidate who doesn’t want to eliminate the programs now Sarcasmic? Gary Johnson. Johnson wants to block grant the programs to the states.

            A vote for Johnson is a vote for entitlements forever. Go look at his website.

          2. explain how John is wrong. Nick’s plan may be solid financially, but its chances of passage are non-existent. Which goes back to the question – how is John wrong?

        2. The only hope is to promise to keep current benefits and sell middle aged people on cuts as the only way to save the program. That is reality.

          I do not even think that would work. By the time people get to “middle age” they are already starting to look at those benefits as being earned. Somehow you are going to have to pay the current benefits, pay lowered benefits to the middle aged, and let younger people out of the system. Not sure how you accomplish that.

          1. They look at it as being earned. But you have to tell them that it is either a cut or bankruptcy. They will agree to it if they think the alternative is nothing.

            And you also have to reform the programs so we perhaps get a bit more for our money.

            1. They look at it as being earned. But you have to tell them that it is either a cut or bankruptcy. They will agree to it if they think the alternative is nothing.

              And you also have to reform the programs so we perhaps get a bit more for our money.

              I am not sure they will believe you if you tell them the system will go bankrupt. I have been hearing that for years. I think reform is the best you can hope for. My guess is means tested, increase in retirement age, and a removal of the cap on SS taxes.

          2. Not sure how you accomplish that.

            you begin by leveling with them, which for a huge number of those under-40, is not much more than confirming what they already think will happen – that the system will be belly-up by the time they age into it. Hell, I’m over 40 and wondering how much longer it can stay solvent.

            This, of course, presumes elected officials being honest which ranks with unicorns and free lunches on the probability scale. But as the chart shows, the malicious truth is that the system is not sustainable in current form.

        3. Quit pretending like the only flaw with Ryan is he’s not radical enough on Medicare. He is not for small government in any sense of the word, in any area. That’s just a fact red Tony

  4. So somehow if we abolish Medicare and Social Security, the healthcare and living costs of seniors will disappear too? Or are they just supposed to fuck off and die?

    You won’t hear the argument presented here, thankfully, not because Democrats are in denial, but because the argument has been debunked on every count many times.

    The drivers of Medicare costs are in healthcare, not Medicare itself. Healthcare will be paid for by insurance, either public or private, as that is the nature of healthcare costs. Every single study comparing Medicare and Medicaid to private insurance alternatives shows that the latter cost people more. Which makes total sense, since you’re adding the costs of middlemen and profits.

    The myth of the wealthy elderly has also been thoroughly debunked–such claims rely on counting assets such as homes as wealth. Seniors making $30,000 a year are somehow so wealthy that they can afford what would obviously be the most expensive private insurance in the market (yet people making $250,000 can’t afford a tax hike, of course).

    Do you want to save the people money, or do you just want to reduce the role of government in the economy? Because they aren’t necessarily the same thing. Getting rid of Medicare will make seniors less wealthy and probably won’t save younger people any money since they will be footing medical bills for their elders. I must repeat a simple truth again: your moral obsessions and fiscal prudence do not necessarily align.

    1. The myth of the wealthy elderly has also been thoroughly debunked–such claims rely on counting assets such as homes as wealth.

      LMAO!

      The myth of the wealthy elderly is debunked by not counting their wealth when calculating their wealth?

      That is industrial grade STUPID!

      1. Are they supposed to sell their homes so they can get healthcare?

        1. Ignoring wealth when calculating wealth is, well, dishonest.

          Not that I would expect anything else from you.

        2. depends on what they want. If they are 75 and demanding hip/knee replacements, then yes, I want them to pay for that. If they are getting high-dollar meds that add two weeks of life, then yes, I want them to pay for that, too.

          What you advocates of nationalized health care conveniently ignore is that those systems survive by necessarily saying no. Waiting times for specialists are a built-in impediment to people actually using those docs. And a raft of meds and treatments are denied to folks of a certain age and level of health.

          1. So you’re bitching that public systems ration, then suggesting that old people should ration.

            1. I’m suggesting that the public system rations so having a national public system ensures more rationing. Sorry, grandpa can’t always get his free pony.

              Ideally, I am suggesting three things: lifting the ban on interstate sales so that competition enters the system, eliminating rules that require coverages included in policies regardless of whether the individual wants them, and tort reform. TX did the last with good results. The other two involve people looking under the skirt of how the system works and discovering that it’s little more than a govt-run cartel that harms the consumer.

    2. such claims rely on counting assets such as homes as wealth.

      What would you call these assets? If not wealth, then what?

    3. So…bureaucrats are not middlemen?

      1. Apparently they are cheaper middlemen than private insurance companies.

        1. The full cost of these programs are masked by ignoring the cost of other parts of government involved in administering them.

          Like your wealth calculations, they are dishonest.

          There is also the fact that the average Medicare claim tend to be much higher than the average insurance claim.

          This allows someone to say that Medicare processes more dollars with fewer people, which is true, though the cost per claim is higher.

          So it’s another dishonest argument.

          Dishonesty for the win!

    4. The drivers of Medicare costs are in healthcare, not Medicare itself.

      that is bullshit on steroids. People live longer than they used; medical technology helps them live longer; that technology comes at a cost. But you see no correlation between health care costs and Medicare expenditures?

      1. Um, obviously. Healthcare costs go up so Medicare expenditures go up. But Medicare is a cheaper form of insurance (for the same level of care) than private alternatives, meaning anything the Republicans have come up with.

        It will be a complex and difficult process to reduce the drivers of healthcare costs in this country, and Republicans will no doubt call it “death panels.” But all evidence suggests a good first step at reducing costs would be to expand Medicare, not reduce it. Since, again, it’s a cheaper means at arriving at the same outcomes.

        You and they just don’t like to see government succeeding at something. But, surprise surprise, your antigovernment dogmatism doesn’t necessarily align with economic reality.

        1. Medicare sets the tone for all other insurance. When a patient racks up a 50K bill but Medicare decides to pay 27K, Blue Cross and the others take notice. And, when the taxpayer is stuck with the cost of indigents and illegals, hospitals pass that on to someone.

          The govt has hardly succeeded and the numbers bear that out. Even Medicare’s founders would be stunned by how far off their projections were. Expanding the govt system has NEVER proven to reduce costs in anything. A far better case can be made that govt involvement in (fill in the blank) artificially inflates the price.

    5. So somehow if we abolish Medicare and Social Security, the healthcare and living costs of seniors will disappear too? Or are they just supposed to fuck off and die?

      Has having those programs in place reduced the cost of living and healthcare for the whole populace?

      The drivers of Medicare costs are in healthcare, not Medicare itself.

      You’re a moron if you think that it hasn’t contributed–because that’s what cost-shifting does.

      Healthcare will be paid for by insurance, either public or private, as that is the nature of healthcare costs.

      Wrong–that is the nature of a completely dysfunctional system. Before Medicare/Medicaid AND the expansion of private health insurance, it cost roughly $500-$1000, inflation-adjusted, to have a baby in the hospital. That’s now $10,000.

      Don’t try blowing smoke about how getting rid of these programs (and restricting insurance coverage) would result in lower healthcare costs. We have actual proof, right here, that the cost of healthcare was cheaper when we paid on a cash-basis:

      http://www.oftwominds.com/blog…..07-09.html

      Every single study comparing Medicare and Medicaid to private insurance alternatives shows that the latter cost people more. Which makes total sense, since you’re adding the costs of middlemen and profits.

      No, the actual cost of the treatment is the same–it’s simply shifted to people who aren’t covered by Medicare and Medicaid. That’s how cost-shifting works, moron.

    6. The rest of your post is boilerplate prog bloo-bloo-blooing that can’t face up to reality. Seriously, Tony, this is all that matters:

      http://www.oftwominds.com/blog…..e5-12.html

      This isn’t politics, dipshit, this is basic math–and your side has shown very little comprehension of it.

  5. Isn’t this a repeat of an earlier article?

  6. Thanks for the article. In fact Libertarians are working on promoting voluntary endowments and improve legalized insurance for health care, not this semi-right wing approach to plunder the elderly.

    REASON really has to say good-bye to this conservative tilt. For info on people using voluntary Libertarian tools on similar and other issues, please see the non-partisan Libertarian International Organization @ http://?www.Libertarian-Internation?al.org ….

  7. Medicare currently represents a losing equation for young and old, seniors and taxpayers. Medicare is spending taxpayers’ money faster than any other government program. It is facing insolvency in its hospitalization program, and it is generating trillions of dollars of massive long-term debt.
    Congress and the American people will have to make a choice. Medicare’s current course is disastrous, for seniors and taxpayers alike. There are finite resources available to reverse the current course, but the faster that policymakers act, the less difficult the task will be.
    There is a better alternative. That alternative rests in harnessing the market forces of choice and competition, and making them the centerpiece of reform, while targeting aid to those who need it most.

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