Thursday, November 27, 2014
Inquirer Daily News

Medicare going 'bankrupt'? Don't believe it

Like private insurance expenditures, Medicare's costs are unsustainable in the long run - if nothing changes. But no one says that's an option.

Medicare going 'bankrupt'? Don't believe it

Credit goes to economist Jared Bernstein for skewering the conservative meme repeated by Rep. Paul Ryan and his supporters, who respond to all criticism of the House budget chairman's plan to privatize (and underfund) Medicare by claiming "that Medicare is going bankrupt. They’ve got to break it to fix it."

Bernstein, former economics adviser to Vice President Joe Biden, writes in his "On the Economy" blog:

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. ... As you see [from the chart Bernstein provides, above], 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.

As Bernstein says, the relentless rise in health-care costs is a broad and deep problem, hardly limited to Medicare. Yet Ryan and his allies are trying to use the "bankrupt" meme to push through a plan that even Newt Gingrich, before he was re-educated, recognized as a radical departure from Medicare's fundamental promise of providing health insurance to the nation's elderly:

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.

A supposedly "market-based" solution - especially one that bizarrely asks aging seniors to become comparison shoppers for the most efficient health-care plans, and provides increasingly inadequate "premium support" as time goes on - isn't going to do anything to solve the underlying problem.

Jeff Gelles Inquirer Business Columnist
About this blog

Jeff Gelles, who writes the Inquirer's weekly Consumer 14.0 and Tech Life columns, takes a broad look at the marketplace of goods, services, and ideas.

Reach Jeff at jgelles@phillynews.com.

Jeff Gelles Inquirer Business Columnist
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