Obamacare, Medicare, and Rationing

I am looking at a Heritage Foundation chart entitled “Entitlements Will Consume All Tax Revenues by 2052”.  It is, as one might expect from the Heritage Foundation, persuasive and thought-provoking.  It shows the extent to which entitlement growth (Social Security, Medicare, Medicaid) will engulf and devour all current revenues in 40 years. Persuasive.

But the chart shows something else that the Heritagers did not note.  Medicare, not Social Security or Medicaid, is the really exploding entitlement.

By my eyeballing of the chart, Social Security now consumes about 5% of GDP, and by 2052 it will rise to a bit over 6%.  Medicaid, currently under 2%, may rise to about 4%.

Compare those numbers to Medicare: currently at 3% of GDP, it will mushroom to 14% of GDP

In other words, Social Security cost will grow 20% faster than GDP;  Medicaid cost will grow 100% faster than GDP;  But Medicare will grow 366% FASTER THAN GDP!

Currently, Social Security costs as much as Medicaid plus Medicare.  In 40 years, Medicare will cost 40% MORE than Social Security PLUS Medicaid! 

The INCREASE in Medicare is more than the TOTAL current cost of the other two!

Since I’m running out of exclamation points, I’ll cut to the chase.  If Medicare costs are not controlled, the other two entitlements barely matter. 

All of which brings us to Obamacare.  The push for health care reform was driven by two things. The scandal of having a sizeable number of Americans uninsured was the primary rhetorical point. But the main driver was in fact the explosive cost of health care, translated for most people into the cost of health insurance.  For workers, the cost of health insurance has been the primary drag on wage growth for several decades.  For employers, it has hurt profits.  Unless costs are controlled, “fringe benefits” will overtake wages for most employees and employers.

The Democratic left has long argued for a British-style “single payer system”, believing that a government-run, taxpayer-supported plan would ease pressure on wages, eliminate the problem of the uninsured, and generate enormous savings from economies of scale.  (Nothing that has happened in the past century has shaken the left’s belief in bureaucratic central planning.)

But there has never been broad political support for such a plan, and even Democrat Obama with a Democratic Congress could not hope to pull it off.  So they cobbled together a plan that required (“mandated”) the uninsured to buy insurance, subsidized part of the cost for them, and paid for it with two questionable elements.

First, they claimed to save money by requiring the health care and insurance industries to embrace a range of cost-control measures which the industries are already pursuing, and have been gradually implementing for years.  Beyond any real management innovation, this amounts to the ever-popular scourging of “waste, fraud, and abuse” – the last refuge of every over-promising, over-spending politician.

Second, and most cynically, they proposed saving $500 billion from Medicare (equal to 10% of Medicare’s current total cost over 10 years), by similar cost-control measures.  And they plan to use the Medicare savings to pay for the premium subsidies for the uninsured.

What’s the problem, you ask?  Check that Heritage Foundation chart again.  They plan to cut 10% from their most underfunded, out-of-control entitlement, and use it to pay for…a new entitlement. 

They know perfectly well that past efforts to control Medicare costs by limiting doctor’s fees have been met with public outcry, especially from the bedrock of health care, the general practice physicians.  And every time it has happened, Congress has (at least partially) backed down.

They also know that Medicare underfunding is already driving many doctors to refuse service to Medicare patients, because the reimbursements are already too low.

And they refused to make any serious effort to restrict the one cost driver that all health care providers agree could be easily restricted – the cost of medical malpractice insurance, which in turn is driven by the parasitic lawsuit industry.  Tort reform remains the one cost-cutting approach which triggers the Democratic gag reflex, or something like the kick under the table from the party’s most generous friends, the trial lawyers.

So we are left to conclude that the party, while serious about insuring the uninsured, is not very serious about cost control. 

But what about the opposition?  Do the Republicans have a plan for cost control?  If so, I haven’t seen it.  Health Care Savings Accounts are all very well, but we know that most people who need them won’t use them (see IRAs). A national market for insurance would help some. Republicans embrace tort reform, but that alone won’t do enough. 

So, back to the chart.  What will it take to tame the exploding costs of health care?

This is a trick question.  I know the answer, you know the answer, even Obama knows.

Rationing.  There.  I said it. Rationing.  The only sure-fire way to control the costs of medical care is by controlling the amount of medical care.

The ironies are enormous. The left claims that private insurers already ration care, by denying coverage for some services.  But state governments already have their hands on that, through mandated coverages.  Your plan won’t pay for your contraceptives?  Lobby your state legislature.  You are a chiropractor, and your patients’ insurance won’t pay for your services?  Hire a lobbyist.

But with the left’s preferred single payer system, the government IS the rationer, and no one can mandate limits on such government systems.  Government oversight never really works when it is overseeing government (see Fannie and Freddie).  So the outcome, as in Britain, is cost control through medical care control without restriction.  Rationing.

Both parties expect it.  Democrats know it must happen, but won’t admit it.  Republicans suspect that Democrats plan to do it (the real meaning of their poorly-put concern over “death panels”), but can’t prove it.  Republicans prefer rationing through cost and individual responsibility, and relying on the government for the oversight function.

Additional aspects of the problem only add complications.  What about medical innovation, one of the prime cost drivers?  New drugs are expensive, but they save and prolong lives.  Democrats, with their instinctive dislike of corporations, know that “Big Pharma” is the problem. And even people being kept alive and well enjoy complaining about the cost of the brand-new medicines that keep them that way.

So, what is to be done? 

Hell, I don’t know.  You tell me.  I was just reading a chart, and I got to thinking.

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2 Responses to “Obamacare, Medicare, and Rationing”


  1. 1 Hengky December 26, 2012 at 10:44 am

    Thank you for your helpful fedecabk Jim, I really appreciate it. We will look into the SEO Pressor plugin as you suggested.My wife and I just started and we are learning more as we go along using WordPress. I am interested in knowing how did you find out about our site?Thanks again for your fedecabk.

  2. 2 Adva December 27, 2012 at 6:59 am

    I can give you a real world example. My 87 yr. old fhaetr-in-law with congestive heart failure, kidney failure and having suffered a stroke lie dying in the hospital. The hospital (without consulting the family) tried an experimental congestive heart failure drug on him at a cost $60,000. He died within a week of this treatment. Guess who paid for the treatment. The family accepted it was the end for him. The hospital pumped up the bill to cover other uncovered costs. It’s not just consumers who need restraint from over utilizing medical care .A huge share of medicare costs are end-of-life costs. Americans simply refuse to accept that they are going to die, and that dying with dignity is not a bad thing. Someone (private insurers, government, medical people or simply not being able to afford it) is going to have to educate Americans on the reality of late life medical care.


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