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.

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