In the local Sunday newspaper, the Minneapolis Star Tribune, I ran across an interesting and informative article in the Business Section. The writer, Eric Wieffering, makes the argument that any effort to fix the deficit will not succeed unless changes are also made to the Medicare program.
I am no expert and he does not provide any links for the facts he cites. However, assuming his information is accurate, it provides compelling evidence that unless the program is modified, the program may not survive for the long term.
More follows below the "jump".
His article begins below:
Once upon a time, a U.S. president pushed through sweeping health care legislation that the country couldn't afford.
The president in question was not the current occupant of the White House. It was George W. Bush, and the legislation created a government-sponsored drug insurance program for anyone 65 and older.
Known as Medicare Part D, it ranks as perhaps the largest expansion of entitlement programs in the past 40 years. Part D won the support of Democrats and Republicans alike -- including the current GOP leadership -- despite ample warnings that it would be ruinously expensive. Not five or 10 years down the road, but immediately.
That 2003 vote came to mind last week as we watched the world's richest country, blessed with the largest and most dynamic economy, scramble to avoid defaulting on its debts. Still, the bracing prospect of having to raise our debt limit from the current level of $14.3 trillion seemed an opportune time to craft the kind of deficit reduction plan that would address, in a substantive and thoughtful way, the entitlement programs that eat up an increasing share of our national wealth.
Unfortunately, any deficit plan that emerges from Congress is going to be another short-term fix for a problem that gets more costly with each delay.
This is especially true of Medicare, the federal health insurance program for those 65 and older, and Medicaid, the joint federal and state program that provides health care for mostly low-income people. Total federal spending on these two programs already exceeds outlays for the single largest entitlement program, Social Security, as well as the budget for national defense.
Medicare expenditures totaled $523 billion in 2010, more than twice what it was in 2001. The average benefit per enrollee was $11,762, three times what it was in 1991. In the coming years those costs are expected to increase at a faster pace than either workers' earnings or the economy overall. The hospital insurance trust fund is now projected to be exhausted by 2024, five years earlier than was expected as recently as a year ago.
Based on current economic and demographic data, over the next 75 years Medicare will pay out an estimated $37 trillion to $55 trillion more than it takes in from premium payments and payroll deductions.
$37 Trillion to $55 Trillion more....If true, this is frightening folks because I don't believe, even with raising the taxes wealthy people pay in, that the US will be able to meet these costs without making some substantive changes in the program.
Mr. Wieffering goes on to state some reasons that the program is in such trouble:
For example, Medicare is currently prohibited from considering price or cost-effectiveness when determining whether to pay for procedures, drugs or devices. So, earlier this year it approved coverage for Provenge, a drug that may extend the life of late-stage prostate cancer patients by up to four months. Cost: $93,000. Wall Street analysts said the decision could mean $2.7 billion in revenue for the drug's maker by 2014.
This month saw the release of yet another study concluding that coronary stents are overprescribed. During the six years through 2009, Medicare paid almost $26 billion for coronary stent procedures. How much of that total represented unnecessary procedures, which can cost as much as $20,000 each?
We expect the federal government to use its purchasing power to negotiate lower prices on everything from cars to computers, so why shouldn't it do the same thing when it comes to the most commonly prescribed drugs? Because Medicare Part D included specific language that prohibits it from doing so. And that's one reason Part D cost more than $270 billion during its first seven years. Over the next 10 years it's projected to cost a total of $1 trillion.
These are just the kind of "cuts" that could make the program solvent, cost cuts not cuts in benefits. In addition, the author states that means testing might be necessary to ensure those who could truly afford to pay a greater share of their health care costs do and that higher payroll tax contributions might also be inevitable.
He finishes with this:
Medicare is a classic example of a government program that few people think works as well as it should, but few can imagine living without. But that's a possibility if we don't act soon to make it stronger and fairer.
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All in all, something to think about this bright sunny day.
12:12 PM PT: With Poll