Busting the Medicare “Crisis” Myth

A Reality-Based Look

Jim LukeProfessor of EconomicsLansing Community CollegeJan 23, 2013

http://econproph.com

We are constantly told that:

“Entitlements like, socialsecuritymedicareandmedicaidare busting the budget.”

“WE HAVE TO……DO SOMETHING SERIOUS!

…CUT BENEFITS!

..PRIVATIZE!

…VOUCHERS!

…THROW GRANDMA FROM THE TRAIN!

AND NOW!”

“We are mortgaging our grandchildren’s future.”

The U.S. budget deficit is rising and out of control.

Budget deficit is shrinking, manageable, and no crisis exists.

Budget deficit is shrinking.

Medicare will be bankrupt and we must act NOW.

http://www.fas.org/sgp/crs/misc/R41436.pdf

Part B (SMI) and D (Rx) are funded annually from general fund.

“Bankruptcy” is a meaningless term. Can Pentagon go bankrupt?

Part A (HI) could become “insolvent” but not “bankrupt”.

• Part A (HI) has– trust fund – dedicated payroll tax.

• General fund taxes are off-limits• If payroll tax is too little, then bfts reduced.

HI (Part A) Is As Healthy As Ever.

Medicare costs are growingout of control.

http://theincidentaleconomist.com/wordpress/chart-of-the-day-projected-medicare-spending-ctd/

Growth in Medicare $/beneficiary has slowed dramatically.

http://www.businessinsider.com/chart-medicare-spending-projections-growth-health-care-obama-economic-report-2013-3

Private insurance & competition is more efficient than government-run Medicare.

Private Health Insurance Admin Costs are 4-6x higher than Medicare

http://healthcarereform.procon.org/view.resource.php?resourceID=004083

U.S. Healthcare costs are risingbut at a slowing rate.

http://kff.org/health-costs/slide/annual-increase-in-national-health-expenditures-and-their-share-of-gross-domestic-product-1961-2011/

We spend more than others…

• US: $7,538 /person/year 2.5 x OECD average

• Higher prices

• Higher usage per person

But we get less.

http://www.forbes.com/sites/danmunro/2013/11/07/the-two-obamacare-charts-that-no-ones-talking-about/

U.S. has a Healthcare System problem.

Medicare is part of the solution.is will be bankrupt.

Jim LukeProfessor of EconomicsLansing Community CollegeJan 23, 2013http://econproph.comjol2@plansolutions.com

Backup Slides for questions

Private insurance is increasingly less efficient than Medicare

Medicare & Medicaid Control Prices Better Than Private

Medicare controls costs better.

• For common benefits, Medicare spending rose by an average of 4.3 percent each year between 1997 and 2009, while private insurance premiums grew at a rate of 6.5 percent per year.

• Karen Ignagni, head of America’s Health Insurance Plans (AHIP), the insurance industry’s trade association, has admitted that private plans cannot bargain down provider costs and has asked Washington to intervene.

Source: healthaffairs.org and others

Deficit as % of GDP is OK.

Raising Eligibility Age is an Incredibly Bad Idea

• Raise age from 65 to 67:– Save $3.7b / year (Fed Gov)– Cost $11.4b / year (seniors, states,

employers, and Medicaid)

• http://theincidentaleconomist.com/wordpress/raising-the-medicare-eligibility-age-is-now-a-really-bad-idea/

• http://theincidentaleconomist.com/wordpress/monkeying-with-the-medicare-eligibility-age/