Speeding Towards a Medicare Disaster

Despite the euphoria of last year’s bipartisan budget agreement, Medicare still faces financial disaster. Medicare Part A, which pays hospital bills, will be running a deficit again in 2004. The Medicare Trust Fund, which is more an internal set of IOUs than a real asset, will be exhausted by 2010. At the same time, Medicare Part B, which pays for physician care, is spending far more than it takes in. In fact, by 2010, the combined deficit for Medicare Parts A and B will be more than $150 billion! And that doesn’t even begin to account for the baby‐​boom retirement to come.

Given the program’s financial problems, the president’s proposal to allow people who retire early to join the Medicare program in exchange for paying a low monthly premium makes no sense at all.

Medicare can hardly afford its current enrollees. On average, Medicare recipients receive $5 in benefits for every dollar that they pay in taxes and premiums. Adding new beneficiaries is like telling the captain of the Titanic to increase his speed.

Moreover, the people most likely to take advantage of the president’s proposal are the sickest and most costly patients. Relatively healthy people are unlikely to want to pay the estimated $400 per month in premiums. Sick people will find such below‐​cost health care an irresistible deal. That will drive up costs throughout the entire Medicare system, increasing taxes or reducing benefits for everyone.

At the same time, the president’s proposal would bring still more of the American health care system under government control. That means more loss of freedom for doctors and patients, more federal meddling and more fee setting. Already, the president has made it illegal for current Medicare patients to privately contract with their doctors.

Four years ago, President Clinton tried to have the federal government take over the entire health care system in one bite. He failed because the American people rejected government‐​run health care. Since then, the president has pursued his goal one small nibble at a time. Medicare should not be the next morsel.