On Medicare

It appears that one of the major topics of this year’s presidential campaign is going to be the Medicare program. The Democrat’s recently-passed health care bill strips down Medicare in order to fund its provisions. Meanwhile, the idea that the Republicans are going to “end Medicare as we know it” is prominent, and for the younger generations appears true enough.

So what is Medicare and what should its future be?

In 1965 President Lyndon Johnson signed into law the act that created Medicare under Title 18 of the Social Security Act with the purpose of providing health insurance to people age 65 and older. See the current Act here. It was a part of Johnson’s Great Society program to fight poverty in America. It was an “entitlement” program and not a “welfare” program in that it had no “means test”–that is, it was offered to everyone and not just those below a certain income level. The Social Security Act, which it amended, had been implemented under Franklin Roosevelt in 1935, and had created an income benefit, but had no medical benefit was available until Medicare was signed by Johnson.

Since that time, Medicare itself has been amended and it now exists in four parts. Medicare Part A, entitled Hospital Insurance Benefits for the Aged and Disabled, provides coverage mainly for hospital stays. See Part A description here. Part B, entitled Supplementary Medical Insurance Benefits for the Aged and Disabled, covers medical services. See Part B description here. Part C, the Medicare+Choice Program, is a less popular program where people can choose to have regulated private coverage instead of the public coverage provided under Parts A and B. Part D, the Voluntary Prescription Drug Benefit Program, covers some costs of outpatient prescription drugs under private insurance plans. In addition to covering health insurance for seniors, the program has also been amended to cover certain specific long-term conditions for all ages. When one hears the term “Medicare” it is usually taken to mean Parts A and B–that is, hospital and medical benefits paid to everyone over a certain age, regardless of income. That is where the presidential debate will likely be focused.

As with Social Security, Medicare began paying out shortly after it was passed into law, and has never truly been a program where people pay into some kind of government savings account only to draw out from it later. It was immediately used to transfer money from taxpayers to existing beneficiaries, and as such it ultimately operates as any other government program, and the idea that money goes into a “lockbox” is, at best, a budgetary fiction.

The problem is that when the program was created in 1965, about 18 million Americans were over 65, today that number is over 40 million. See population numbers here. Seniors now represent over 13 percent of the United States population, a number which is increasing as the baby boomers continue to retire. See percentage numbers here. Reasonable projections into the future show that the numbers are simply unsustainable. See here for a good breakdown from the Heritage Foundation.

The simple truth is that Medicare, as it currently is constituted, cannot go on forever, and all the good intentions in the world will not change that.

So the first important question a person must ask when looking to congressional or presidential candidates and their proposals for Medicare is: Are they telling the truth?

Politicians are, of course, trained by circumstances and their own will to do what will make them popular. Telling people a federal program that distributes checks to a solid voting block (those over 65) is badly broken and needs fixing is definitely not popular. But it is the truth. If you care about the future of Medicare, you must ask yourself in these last months of the campaign which politicians are facing this truth.

Fear has always been a factor in the Medicare debate. Both sides have been afraid to address this problem for decades for fear of being accused of cutting the program. Morally, those currently over 65 have the right to rely upon it as it is now. It was promised to them and is something they relied upon as they prepared for their retirement. To cut or considerably restrain the program for them would be unjust. Arguably this logic might extend to those 55 and older, but if it is extended much farther, the program will simply be unsustainable for future generations. Precious few are arguing that current benefits should be cut or ended–certainly neither of the presidential candidates. Threats that the other side of a political debate is going to harm (“slash” is usually the verb of choice) current benefits to seniors, however, are common.

If Medicare were in fact going to be slashed or ended, this would very much raise the moral question of the preferential option for the poor. Caring for the poor is central to Jesus’ teachings and those of other faiths, and the principle is also firmly grounded in Catholic teaching. See Canon 222 of the Code of Canon Law here. Some Catholic groups have suggested that Paul Ryan’s budget proposal earlier this year violated these principles. Others argue that allowing the plan to continue and go bankrupt would be less favorable for all concerned. (For Ryan’s defense against these charges in a television interview in April of 2012, see here, and for his Bishop’s recent, well-reasoned response on some of these charges see here and here. Also, there is Pope Benedict’s interview book The Light of the World where he discusses the serious conscience issues of taking on so much debt that it harms future generations, here).

So there is an unsustainable problem. What can be done?

The first option, of course, is to do nothing. If Medicare is not changed, it will balloon out of control, and either taxes or the debt be raised to even more impossible levels. American is in debt to a staggering 16 trillion dollars right now, see the national debt clock here, and taxes are at near-record levels. Moreover, raising taxes in a bad economy is like slamming the brakes on job creation, which is good for no one.

The second option is to change the program. As it is, Medicare is collected as a payroll tax, run through a costly government bureaucracy, then spent. The inefficiencies in such a system are obvious. The only serious question then, is how to change this badly damaged program. There are two options.

On the one hand you have the Obama Administration, which has already passed an enormous overhaul of America’s health care system. The act adds layers of government oversight and regulation to the whole health case system. In other words, it takes what is wrong with Medicare and doubles down on it. To fund the health care act, Obama stripped $716 billion from Medicare. See a Forbes analysis here. So he is in the difficult position of attacking Romney/Ryan for allegedly planning to cut a program that Obama himself has already cut.

The Romney/Ryan plan involves maintaining the Medicare program for people over 55, then allowing those before that age to choose from Medicare or a menu of private insurance options when they reach retirement age. The idea here is that competition and eliminating the inherent inefficiencies of a government program will reduce costs. Moreover, the rate of growth will be restrained (cutting how fast a government program grows, of course, is not a cut). The Romney/Ryan proposal can be found here.

Whether the Romney/Ryan plan goes far enough to be a permanent fix is an open question, but it is certainly a step in the right direction, where Obama’s plan is simply another dose of big government. (For more on this see On Socialism, here). Medical vouchers and means testing the program (such that higher income people who can afford their own health care are taken care of Medicare) are other possibilities in the debate.

The main thing to understand, though, is that doing nothing will mean the end of Medicare after inevitably rolling up a debt future generations will not be able to pay. President Obama and his allies in the Senate like to accuse their opponents of wanting to “change Medicare as we know it”. Such accusations, in truth, should be taken as a compliment for those brave enough to tell the people the facts about Medicare and about its future, unless something is changed now.

© Copyright 2012  JD Pierce, Traditium.