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Commentary

Medicare Mess Guaranteed to Grow
Robert E. Moffit, Ph.D., Washington Times, 6-14-06

While Republicans and Democrats spar over implementation of the Medicare Drug Benefit in hopes of gaining votes in November, Moffit reminds us that the real problem isn't glitches in implementation, but the long–term fiscal sustainability of the program. He warns that, unless something is done soon to rein in Medicare spending, the program will swamp federal government in coming decades.

His solution: transform the program from a defined benefit into a defined contribution program.

The dynamics are in motion. When the costs increase, as they surely will, so will congressional pressure for some form of price–control regime on prescription drugs. (That will be the ultimate prescription for lower–quality medical care for American seniors: You can't get more of anything by paying less for it.)

Meanwhile, the Medicare trustees report that the long-term (75-year) unfunded liabilities of the Medicare program–the benefits promised but not paid for–have reached $32.4 trillion, $8 trillion from the drug entitlement alone.

The bigger costs will hit heavily when the first of the 77 million Baby Boomers start retiring in 2011. No one in Congress has unveiled a plan to pay for it. The tacit consensus seems to be: Stick the 20-somethings with the big bills. Those 20-somethings may not realize it now, but they have a lot of taxpaying to do—Medicare, plus larger Medicaid and Social Security bills. What will it cost to fully fund the Big Three? My colleague, Heritage federal budget expert Brian Riedl, points to cautious, mainline predictions of the federal budget picture which show that, absent serious entitlement reform, the cost will boost federal spending from 20 percent of gross domestic product to almost 38 percent of gross domestic product by 2050.

Mr. Riedl says the real figures may be much worse–leaving Congress the choice of raising taxes until they are $11,000 higher per household than now, or eliminating virtually all other federal programs, including defense and veterans benefits, by 2045.

Congress must grapple with entitlement spending. One option is means–testing the benefits. Starting next year, wealthy seniors (singles making above $80,000, couples above $160,000) will be asked to pay a little more of their Medicare Part B premium costs -- 28 percent, rather than the 25 percent that all now pay.



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