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Thursday, June 16, 2011

Misleading Medicare Mantra

Jared Bernstein notes that over the longer run, we do need to find a way to control the growth of health care costs. But in the nearer term, stories about Medicare going broke are overstating the problem in order to win the political and ideological battle:

Misleading Medicare Mantra, by Jared Bernstein: When you criticize the Republican’s plan for Medicare privatization, their kneejerk comeback is to claim that Medicare is going bankrupt. They’ve got to break it to fix it. It’s a misleading non sequitur that should not go unchallenged.

The claim was amplified recently by the Medicare Trustees report, which projects that the Medicare Hospital Insurance trust fund (“Part C” of the program) will become insolvent by 2024.

But before you jerk that knee, consider these points:

  • the other main parts of the program, Part B (insurance covering doctors’ services, outpatient care, medical supplies) and Part D (the prescription drug benefit) are mostly funded by premiums and general revenues, and, according to the trustees report, are “projected to remain adequately financed into the indefinite future.”
  • the Trustees’ Report always presents the date that the trust fund won’t be able to fully meet its obligations (see figure below). As you see, it’s a moving target, most recently shortened by the weak economy and lower tax receipts. That doesn’t we should ignore the warning, but it does not mean that the insolvency date will continue to change with policy, economic, and cost changes.


  • Note the highlighted word “fully” above. In fact, if the trust fund were to exhaust in 2024, income coming into the fund would still finance 90% of benefits. That’s something to be avoided, but it’s a different kind insolvency than that implied by the R’s mantra.
  • Finally, Ryan and company did not discover this challenge of paying for health care. We have a law on the books to meet the challenge—the Affordable Care Act. It has already improved Medicare’s fiscal outlook, though the real work—reducing the rate of health care costs for years to come—hasn’t even started yet.

... Complacency is not an option, neither for Medicare nor private sector health care. We need to continue to implement the ACA and get its cost-control functions up and running. But the bankruptcy mantra is a misleading tactic designed to scare you into accepting a privatization scheme that will significantly diminish the health care security of retirees. That too is not an option.

    Posted by on Thursday, June 16, 2011 at 12:42 AM in Economics, Health Care, Politics | Permalink  Comments (29)


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