Thursday, August 27, 2009

Medicare on Life Support

The newly christened Kennedycare is trying to gain new life. Not to speak ill of the dead, but if Obamacare wasn't such a great idea then why should the same plan with a new name be any better?

But this isn't about Kennedycare, or Obamacare. This is about a plan that has been around since 1965. Medicare was part of sweeping legislation signed into law by LBJ to provide health insurance for seniors.

For the last 40+ years Medicare has limped along with only a few changes.

So how well is the government doing at managing the financial side of Medicare?

Not to well according to US Government Spending.

In fiscal year 2008 the federal government spent $391 billion on health care for seniors. That's about $10,000 per senior covered under Medicare.

That same fiscal year the federal government took in $194 billion in Hospital Insurance taxes.

That's a paid loss ratio of 200%.

Expressed another way, Medicare paid out $2 in benefits for every $1 they took in by way of taxes earmarked for Medicare.

How about the Social Security side?

It did much better but nothing to write home about.

In FY 2008 the federal government collected $658 in Social Security taxes and paid out $669 in benefits. At least it came close to breaking even.

So they have a retirement plan that has been in place for 70+ years and it is around a break even point (not including unfunded liabilities) and a health care plan that is slightly more than 40 years old and spending money two years worth of budget in a year.

And they want to take over health insurance for everyone.

How long has Medicare been losing money like this?

In 1998 they spent $193 billion on Medicare and took in $120 billion in HI taxes.

In 1990 the collected $69 billion in HI taxes and spent $98 billion on Medicare.

I could go back further, but why bother?

OK, just for chuckles and grins, let's look at 1970. Medicare is 5 years old at the time. They collected $5 billion in HI taxes (dang that number seems small) and paid out $6 billion in Medicare benefits.

So it would seem that Medicare has never paid for itself and continues to run up a deficit, year after year.

I challenge you to find a single health insurance company in business during that time period that continually paid out more than it took in.

Of course some would say this is proof we need to let the government run a health insurance scheme for everyone. They can do it for less money than a profit driven insurance company.

But here is one difference.

If the insurance company continually loses money they eventually get out of that line of coverage, and many have. When they do, another carrier steps in to take their place.

Those losses do not become an undue burden on the taxpayers for generations to come.

I can't say the same for Medicare.
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