Important Truth On Medicare


July 30th marked the 50th anniversary of the signing of Medicare into law by President Lyndon B. Johnson. It’s time for a mid-life reality check.

Last post discussed Jeb Bush’s call for Medicare reform (Bush Right On Medicare – It Needs Reform). Here’s some important facts that show us why Bush is correct in his analysis.

In 1966 Medicare spent $3 Billion. In 1967 the House Ways and Means Committee predicted that the program would cost $12 Billion by the year 1990. It actually cost $110 Billion that year. In 2014 the program cost $511 Billion and in seven years it is projected to double to more than $1 Trillion, according to the left-leaning Kaiser Family Foundation.

Even some liberals recognize this is unsustainable. The latest projections of the Medicare trustees, released this month, indicate the main trust fund for hospital care will be exhausted by 2030.

There are several reasons for these depressing statistics. First, when Medicare was passed in 1965 the average life expectancy was only 70 years. Today that has been increased to 79 years and many suggest it will be 84 years by 2050.

Second, in 1965 the program was serving 19 million Americans. Today the program serves almost 50 million Americans. Every day, 10,000 baby boomers are being added to the system according to the Pew Research Center.

Third, Medicare suffers from unrestrained fraud and improper payments. According to the Government Accountability Office, $60 Billion of the $511 Billion in expenses in 2014 fell into this category.

For these reasons, Medicare is failing financially. But it is also failing to meet the healthcare needs of many seniors. Because of low payments to physicians, 3 out of 10 seniors have trouble finding a primary care physician who will accept this insurance, according to the Medicare Payment Advisory Commission. A survey conducted by Jackson Healthcare, a healthcare staffing company, found that 10% of more of 2,000 physicians surveyed don’t accept Medicare.

To solve this problem, Congress recently passed the Medicare Access and CHIP Reauthorization Act. This law calls for payment increases of 0.5% a year for the next five years. It is doubtful this will motivate many doctors currently not accepting Medicare to change their policy, but it may temporarily keep some doctors from leaving the system. In reality, doctors accepting Medicare patients are really doing this work for charity since Medicare payments have been calculated to cover only 78 % of the true costs of delivering healthcare.

Proposed Solutions

Several ideas have been proposed as solutions. Raising the eligibility age to 67 seems reasonable with the ever-increasing life expectancy. According to the Congressional Budget Office (CBO), this change would save $19.1 Billion by 2023.

Sally Pipes, CEO of Pacific Research Institute, calls for the program to be converted from an open-ended entitlement program to a system of means-tested vouchers. She says, “Under such a system, the government would give every senior a voucher based on health status, income and age. Seniors in better health and those who are wealthy would receive smaller vouchers. Sicker or needier seniors would receive larger ones.”

“Seniors would then choose from among privately administered health plans the one that best suited their needs and budget. Insurers would have to compete for beneficiaries’ business, and providers would have to compete to get on the most popular plans. Lower prices and better-quality care would be the result.”

Increasing competition between providers and giving patients more freedom of choice will always improve quality and lower the cost of any service. But this will require eliminating federal regulations that drive up the cost and don’t improve the quality. These kinds of improvements are needed for all Americans to receive better healthcare at lower cost; not just for seniors.

But don’t be surprised when Democrats demagogue this issue with “Mediscare” tactics that try to alarm seniors to win their votes. Responsible politicians take on serious issues like this and are willing to tell the people the truth.

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