The Coming Showdown Over Medicare Reform

The trustees of the Medicare system recently reported that the program will go broke in the year 2024—five years sooner than was projected just last year.

The millions of Americans who have been counting on Medicare to be a reliable, stable guarantor of affordable healthcare in their senior years should be asking themselves, “Who is responsible for this predicament?” The short answer is “lots of people,” but let’s start by looking in the mirror.

The shameful status of Medicare brings to mind a sequence in the movie “Animal House.” A freshman pledge, Flounder, let some upperclassmen in the fraternity use his brother’s brand-new Lincoln for a road trip. Naturally, the brothers trashed the car. As Flounder wept in regret, the suave, smooth-talking senior, Otter, put his arm around Flounder’s shoulder and explained the facts of life to him: “You [goof]ed up; you trusted us.” (“Goof” replaces the original R-rated verb.)

“We the people” have goofed up big time, trusting a government bureaucracy to oversee our healthcare.

When will we learn that gigantic bureaucracies—undisciplined by the profit-motive and insulated from the normal competitive pressures of the marketplace—are inherently inefficient?

And when will a majority of Americans take a sober look at Uncle Sam’s track record and recognize his chronic incompetence? Consider:

Government meddling, abetted by misregulation and a compliant Federal Reserve, generated the housing bubble/bust that has caused the market value of most Americans’ most valuable asset—their home—to decline, plunging millions into negative equity.

Chronic federal overspending has impelled a weaker currency and higher prices of daily necessities.

The quackery of government stimulus spending has produced anemic economic growth; the usual result when the government share of a country’s GDP dramatically expands.

The government-run Social Security Administration will henceforth operate in permanent deficit—a grotesque malfeasance that would have resulted in the imprisonment of private executives who perpetrated such a swindle.

With a record like this, how could anyone trust government to get it right on healthcare? The big question now is: Why are so many Americans opposed to Congressman Paul Ryan’s attempt to put Medicare on sounder financial footing?

Part of the resistance to fixing Medicare may be simple partisan loyalty—i.e., Republicans are the enemy; oppose everything they propose.

Part of it may be fear of change.

Part of it may be the seductive belief of “the free lunch” and a corresponding belief that Congress simply has to raise taxes on somebody else to obtain necessary funds.

Part of it may be that Americans believe, “We paid for it, so it’s ours.” Well, yes, we’ve been paying for Medicare via payroll deductions for decades, but no, our promised benefits remain unfunded due to government mismanagement. (We [goof]ed up; we trusted them.)

Part of it may be what economists call “short time horizons”—that is, focusing on the short run instead of the long run. Many seniors tend to do this. So do many politicians with their fixation on the next election. In economics, short-time horizons are highly correlated with poverty; in other words, ignoring the long term is why many people are poor.

Many of those on the extreme left oppose reforming Medicare for another reason entirely: they desire a state-run monopoly of healthcare. They prefer a socialized healthcare model. To attain that goal, the left needs to merely block reforms to Medicare. Gridlock and stalemate will assure Medicare’s eventual bankruptcy and therefore its subsequent nationalization (a la Fannie Mae and Freddie Mac).

Early polls show stiff resistance to Congressman Paul Ryan’s proposed Medicare reforms. If the Republicans can sell the public on the need for reform, then Medicare’s solvency may be prolonged. If the public repudiates Ryan’s plan by returning a Democratic majority to the House while re-electing Barack Obama to the White House, then a government takeover of the healthcare industry is all but assured.

The stakes in the next election are enormous. The Medicare reform contest could be the one for all the marbles.

COPYRIGHT 2011 THE CENTER FOR VISION & VALUES

Mark W. Hendrickson

By

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.

  • Charles Woodbury

    These social programs are too destructive to families. Even social security (which I’m on ) has had the result of families separated from the older generation, as they don’t need to care for them now.
    A government run healthcare system will necessarily result in euthanasia on a larger scale.

  • dianne hofmann

    Every developed country except the US has socialized medicine. They are also healthier and live longer. It is not government involvement in health care that is the problem. The problem is that it is too hit and miss and scrambled up with private care.

  • Carl

    Dianne,
    • Since when is truth found in consensus? (everyone does it)
    • If the fact is that socialized medicine is superior, why stop at medicine?
    • There are many factors in healthier and longer lives, diet being at the top of the list—Americans have one of the worst diets.
    • I say free market capitalism and profit driven innovation has increase life expectancies, your say a planned economy has.
    • Abortion and contraception makes socialized medicine affordable in the short term, but what happens when the country is dying off and there is no one left to pay the bills—PIIGS are slaughtered, Portugal, Italy, Ireland, Greece, and Spain are bankrupt.
    • Privatized modern medicine has not been tried and found wanting; it’s found difficult and left untried.
    • Today, a health care giver’s revenue is already at 30 to 40 percent from socialized medicine (federal government). What you’re really arguing is that partial socialization doesn’t work, what we really need is the Feds to control it all!
    • Every government monopoly is bankrupt: Amtrak, almost any public transit system, USPS, S.S., Medicare, Medicaid. If government could only control all of health care everything else will fall in place? If that doesn’t work what’s next?

  • Jeff V.

    To say that “citizens of other developed countries are healthier and live longer” is an oversimplification at best, and deceitful at worst. Even so, health care systems of such countries are on a similar, unsustainable path. I find it useful to differentiate between health care (or health and wellness, which is largely under MY control), and medical care (or coverage, which is much less under my direct control). The government does not OWE me the latter–and yes, they have largely run it into the ground, as they have the DMV and Post Office.

  • Mandy P.

    It’s also helpful to point out (in response to Dianne) that it’s difficult to pin point what the actual health ratios are compared to the US because (a) all of the statistics are self reported by each nation instead of one group reporting for all and (b) each nation reports its vital statistics differently. For example, in the US our infant mortality rate appears higher than in other places. However, we report every single instance of infant mortality. So if a child is born extremely premature and dies as a result, we count it as infant mortality. In many other countries, that same scenario would not result in the death being counted in their infant mortality statistics because the child was not full term. The point is that, because we arent all on the same page, differences in statistics from nation to nation can be very misleading.

  • Michael DePietro

    “Every developed country except the US has socialized medicine.”
    This is not true since France for example has a mixture of both. It is also not a fact that we have a private system. In the United states about 1/2 the health care is government run ( medicare, the VA, and medicaid) and the other half is heavily regulated since the private insurance market is heavily regulated and is thus not a market oriented health care system at all.

    It is also important to realize that we subsidize the socialized sytems across the planet, as there is some evidence that drugs are developed faster in the US market because of the absence of price controls. See this link:
    http://www.nature.com/nrd/journal/v6/n4/full/nrd2293.html. In fact this argument can be extended to medical innovation in general as the article at the following link makes clear : Shttp://www.nytimes.com/2006/10/05/business/05scene.html
    So a simple lets compare Europe and United States systems assuming that the US represents the “free market system” and Europe is the government system is not an adequate approach. Neither system is entirely government run, and neither system if entirely market based. And the outcomes seen in Europe are in part aided by technological innovations availble to them, but funded in part by the more lucrative US market.

    Beyond that comparing health outcomes is just as problematic. While some often compared outcomes such as life expectancy are better ( marginally ) in Europe than the United States, they are affected by factors that are independent of the health care system, for example, the levels of obesity are less in europe, as are in many cases the levels of traffic related deaths. These are things which lower life expectancy but are largely not under the control of the health care system. .
    While some health care outcomes that are directly a result of the quality of health care, like the probability of survival if you do develop a serious illness,such as cancer are clearly better in the United States: see the following link : http://www.ncpa.org/pub/ba596.

    It is not even clear that more socialized systems have better access for example an article in the British journal of opthalmology described waiting times of 15 months for cataract removal. Most people in the United States with find this unacceptable.

    So at the end of the day what the actual evidence would show, is that :
    All health care systems in the developed world have more or less governement control. There is a heavy dose of this in the US, but even heavier in the rest of the World, health outcomes are ambiguous, but those that depend purely on the technical quality and sophistication of the care are probably better in the United States. Access to high level care for at least some things such as surgery, imaging studies etc is better in the US, although these advantages are not reflected in outcomes that are sometimes cited such as life expectancy.

    It is not clear from all this that the answer is more government control. One could more easily argue that the flaws in the US system are from the clumsy mix of Socialized and regualted medicine, while the best aspects are the result of the free market, and the smart move is more free market. ( shrinking that portion of the system that is socialized, or excessively regulated.

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