Monday, April 16, 2012

Medicare in Crisis

To say Medicare is fine or there is no crisis is to be in denial. With 45 million people on Medicare and a trust fund filled with IOU's while the federal government is hemorrhaging money at some point you have to admit there might be a problem.

The first step for alcoholics is to admit they have a problem.

Maybe it is time for Congress, and the nation as a whole, to do likewise.

The N. Y. Times offers this information.

About 65 percent of the cost of the Obama health care law is supposed to be met by Medicare expense reductions and tax increases totaling roughly $1 trillion over 10 years. The deficiency with this plan is that it amounts to double-counting, using urgently needed Medicare economies to finance the new law.

Medicare expense reductions. Code for paying medical providers less and shifting more of the cost of care to Medicare beneficiaries.

Thanks to escalating health care costs and repeated sweetening of benefits without commensurate increases in revenues, Medicare was underfinanced by a staggering $37 trillion as of Sept. 30.

That’s the amount — about two and a half times the annual output of the United States economy — that would have to be deposited into the Medicare trust funds to adhere to the principle that members of each generation would contribute enough to Medicare while they were working to pay for their care after age 65.

If corporations were mismanaged in the same fashion there would be a Congressional investigation. Congress is doing a poor job of policing themselves.

The current effort to trim Medicare costs, through initiatives like limiting payment increases to health care providers, amounts to picking the low-hanging fruit. What comes next will surely be more painful and contentious.

Given that context, the government’s accounting practice — counting $748 billion of cost savings and $259 billion of revenue increases toward both Medicare and the cost of the Obama plan — is particularly troubling. Moreover, this problem is largely hidden from public view.

Under Washington’s delusional rules, budget crunchers in both the White House and Congress credit this $1 trillion twice: once in calculating that the care law will generate more revenues than costs, and again in concluding that the Obama plan will chip away at the Medicare problem.

Only in DC can you not only spend the same dollar twice, but you can continue to spend money you don't have and never have to worry about the downside risk of your stupid decisions.

It’s fine to ask the wealthiest to pay disproportionately for important social programs. But the top taxpayers, who are already on the hook for around $260 billion of the law’s costs, can’t be expected to shoulder the entire $1 trillion burden that would flow from intellectually honest accounting.

At a time of trillion-dollar deficits, new initiatives must be paid for in reality, not just the world of Washington arithmetic. The effort to curb Medicare costs must continue and accelerate — but all sides need to be more honest by counting these savings just once, not twice.

Reality check time.

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