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Commentary

Crisis du Jour or the Real Thing?
Joe Antos, American Enterprise Institute, 5-3-06

Antos delves into the niceties of the Medicare trustees report to show how the program is a crisis in slow motion. Antos likens the forces driving Medicare's relentless cost expansion to geologic stress preceding an earthquake—with similar results for the economy, unless politicians get serious about real Medicare reforms.

Calamities seem to come and go on a daily basis. Medicare's struggle to enroll seniors in its new drug benefit program has attracted crisis–level attention in the press. It is not surprising then that the public has overlooked Medicare’s real crisis, which was the subject of a report released on May 1.

Buried in the pages of a dry study, the Medicare trustees report that Medicare will not be able to pay for all the health care seniors have been promised. In a masterpiece of understatement, the trustees tell us that "the financial status of... Medicare remain[s] problematic... We do not believe the currently projected long run growth [rate] of... Medicare [is] sustainable under current financing arrangements."

In plain language, Medicare spends more than it takes in, and the deficit will only continue to grow sharply in coming years. The program is running on borrowed time. If we expect Medicare to meet its financial obligations, policymakers will have to take action. We can hike taxes, reduce spending on other federal programs, or cut Medicare costs substantially—but we do not have the option of ignoring the problem...

Unless substantial reforms are initiated, Medicare faces a bleak future of rising costs and tightening revenue. The fact that Medicare has always paid the bills over its four–decade history does not mean that the program's future is manageable with minor policy tweaks. Fundamental restructuring is needed to promote competition and offer beneficiaries a choice of health plans. We need to replace Medicare's culture of entitlement, which distorts the decisions of patients and providers alike, with a culture of individual responsibility and efficient delivery of care.

It is difficult for policymakers to take on the arduous task of overhauling a major social program. The pain of reform is immediate, while the rewards (in terms of improved efficiency, lower cost, and better quality) materialize later. The political calculus is clear.



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