Monday, August 17, 2009

Medicare as an Example of Government Health Care

People that use Medicare as an example of "a government single payer system that works" are ignoring one very important aspect of the system- it is going broke. It is going broke in such a titanic way that it threatens to take the entire government budget down with it. Medicare seems like a bargain only because the people getting it are not paying for most of it. In fact, none of us are paying for all of it yet, we are just borrowing to cover the shortfalls.

Anything you buy on credit seems like a good deal until you have to pay for it. Many of you have experienced buying for example, a new car. The first month it seems like a great deal. You are enjoying it, but you haven't paid for it yet. After about the 25th payment you are regretting it every month. That is the experience Western countries are about to have with their dalliance with socialism. The government has "provided" all these goodies to the population using the people's credit card and the politicians simply left it to the next generation to pay for their promises. Well, that generation is here, and they can't pay the tab they have been stuck with and are pretty angry about the scam. The use of public debt benefited one generation at the expense of the other, and the bankers most of all.

(analysis of the numbers and what they mean on the jump)


Blogger Mark Moore (Moderator) said...

Medicare has three parts, only one of which is financed by Medicare deductions on your payroll taxes. That is Medicare Part A, which covers Hospital Inpatient Services.

Medicare part A is currently insolvent. The amount of money spent on part A exceeds the amount collected in payroll taxes. A few years ago, before baby boomers started retiring, the amount collected exceeded the amount spent, so there was a "trust fund" accumulation called the Medicare HI trust fund.

Naturally there is no money in this fund, it was all spent for other stuff and the only "assets" in the fund is a bunch of IOU's from the Federal government. They now have to pay back those IOU's by borrowing from someone else, but even if all of the money was really there, the HI fund will be depleted in ten years.

In 2019 the HI fund is projected to be exhausted an collections will only amount to 78% of expenditures. From there it gets worse. Over the next 75 years either payroll taxes will have to more than double or benefits cut in half (or some balance of the two) to pay for these promises.

That is part A, but what about parts B (doctor's visits) and D (prescription drug coverage)? Those are funded by a combination of premiums (in the case of part D) and general revenues. Did you realize that much of Medicare is funded by general revenues, or did you think that your payroll deduction covered it? Sorry Charlie, those payroll taxes are not even close to covering it. General revenues currently pay for about half of medicare spending, and it is projected to get worse.

Medicare only looks like a good deal because we are enjoying it but we haven't paid for it yet!

A few years ago, about one of every six Federal revenue dollars went to Medicare. In forty years, assuming federal taxes stay proportional, it will consume one of every two dollars! That does not even count Social Security, which is a model of stability by comparison.

The reason Medicare looks so good compared to private insurance is that private insurance is run by grown-ups who are responsible enough to make sure the services they provide are sustainable. The insurance companies may not be ethical, but they are honest. They exercise the brutal honesty that the laws of economics and the power of the bottom line demands.

Medicare on the other hand, is run by egotistical statist politicians who have flattered and indulged people in order to betray them. They are neither ethical or honest. They don't care about the bottom line, or the economic realities. They look only to the next election, not the next generation.

They see their job as redistribution of wealth, plundering group X to get the votes and accolades from group Y. And whose wealth is easier to plunder than that of the next generation? They are not even around to complain or vote against the pillaging of their future income. Hence the massive use of debt to pay for outlandish political promises.

Private insurance companies are the rationer of services right now, so they are the bad guy. But when has a private insurance company told an elderly person that they must lose their home and reduce their net worth to nothing before they will provide their services? Medicare does that as a matter of course. At least this is consistent. They don't let you pass on wealth to the next generation.

I tell you once the government gets us all on their hook THEY will be the rationer of services, and it is a lot easier to change insurance companies than it is to change governments.

Medicare as an example of the "success" of government health care? Tell me that once its paid for.

3:30 PM, August 17, 2009  

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