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Sep 14, 2009

Obamacare Bails Out Medicare

Obamacare is really the Medicare bailout
09/12/09 - Daily Mail by Don Surber

Medicare Is No Model for Health Reform
Many doctors refuse Medicare patients because payments are so low.
09/11/09 - WSJournal
  by Grace-Marie Turner and Joseph R. Antos

Medicare And Social Security Unfunded Liabilities
03/24/04 - Parapundit by Randall Parker


I agree with Don Surber that "Democrats need the trillion-dollar [taxation and spending of] Obamacare to mask the truth that Medicare is a failure."

The rush for "healthcare reform" is driven by the fact that Medicare and Medicaid are broke. Democratic politicians are trying to scurry for political cover to avoid blame. They have promised benefits for 30 years that they can't deliver to the current population of baby-boom retirees.

Medicare Fact List

Turner and Antos [edited]:

  • Medicare is going bankrupt, with unfunded promises of $38 trillion (38,000 billion).
  • Private payers are subsidizing Medicare. The average family in a private plan pays $1,788 a year to compensate for Medicare/Medicaid underpayments. This is a hidden tax of $89 billion per year on the insured.
  • Expansion of entitlement programs threatens our economic security.
  • Low administrative costs are a myth. Medicare's administrative expenses would be twice as high if costs for revenue collection, personnel, and enforcement were properly included. Plus, private insurers provide many services that Medicare does not.
  • Medicare is rife with fraud. 3-10% of all medicare spending is wasted.
  • Medicare does not provide comprehensive coverage. It covers only 50% of senior's health costs, and most pay for supplemental "medigap" insurance.
  • The Medicare model is obsolete, frozen in bureaucratic rules set in 1965.
  • Many physicians do not accept new Medicare patients because payment rates are so low. Medicare almost always imposes price-controls to lower costs, rather than promoting innovation and efficiency.
  • Medical decisions are made in Washington. Medicare has cut funding for the cancer drug EPO, implantable cardiac defibrillators, and virtual colonoscopies. Providers battle with politicians, while patients and doctors can only watch from the sidelines.
  • No one is running the show. The Obama administration has not yet nominated an administrator for the Centers for Medicare and Medicaid Services.
  • Medicare does guarantee health coverage, even if not as good as advertised. But, it will not be able to pay all the hospital bills that will come due in eight years.

Going Broke

"Going broke" means that current medicare taxes of 2.9% on wages are not enough to pay for Medicare. The shortfall for Medicare alone is about $61.6 trillion ($61,600 billion). Not a typo. Medicaid is mostly a mandate on the states with federal matching funds from general taxes, also going broke.

The total production of the U.S. in 2008 was about $14.25 trillion ($14,250 billion). Total tax payments by "the rich" are currently about $1 trillion ($1,000 billion).

The total picture is even worse, as reported by NCPA Senior Fellow and Social Security/Medicare Trustee Thomas R. Saving (via Parapundit Mar 2004):

  • Social Security's unfunded liability is $10.4 trillion ($10,400 billion).
  • Medicare's unfunded liability is $61.6 trillion ($61,600 billion). [An estimate above is $38 trillion].
  • The prescription drug benefit is underfunded by $16.6 trillion ($16,600 billion).
  • By 2020, the combined deficits in these programs will consume more than 1/4 of all federal income taxes.
  • 2030 is about the midpoint of baby boomer retirement. Combined deficits will consume more than 1/2 of all federal incomes taxes.
  • Today's college students will reach retirement age in 2050. Combined deficits will consume more than 3/4 of all federal incomes taxes, just to pay benefits currently promised.

The unfunded liabilities above add to $88.6 trillion. The total 2008 production of the U.S. was $14.25 trillion, about 1/6 th of those unfunded promises.

For comparison, an income of $50,000 would require that you pay about $300,000 toward these unfunded promises. Is that going to happen?

Economic Reality

I think politicians know that they can't raise taxes enough to fund the Medicare/Medicaid promises, and want a way to hide their responsibility for the coming denial of services.

One way is to put everyone into the medical care pot. We then all get equal amounts of services at whatever high tax rate the government can levy. The young must be coerced into this system, to extract as much money as possible to serve the old.

Of course medical services will be meager under "health reform", with rationing and slow delivery for everyone. The government has promised $88.6 trillion in unfunded services. Politicians now find that just $1 trillion in increased cost during the next 10 years is politically unacceptable. That is the center of the healthcare debate. So, $88 trillion in promised services are not going to be delivered in the next 75 years, more than $1 trillion per year. This would also kill any progress in medical care, as we all stew in the rationed system that covers over the fraud of the mostly Democratic politicians.

The alternative is more fair but also ghastly. The government made promises to the now-old that it can't keep, and the now-old did not pay enough for their own care or retirement, relying on the wishful-thinking or lies of the government.


The moral question: Are the now-old responsible for the choices of the politicians who provided wishful-thinking or lied to them? I think that they mostly are. Everyone who supported and voted for these government programs deserves a lot of the problems that they are going to have.

The government is supposed to be a wise planner, arranging for a future that is beyond the calculation of most people. Instead, it has acted selfishly and wastefully, taking the money (resources) that the now-old could have used more wisely, and squandering it so that it is not now available.

The younger portion of the population should watch out. They fancy themselves to be caring people. The government is going to hold them to that vision by extracting very high taxes, or trying to. It will be interesting to see if that caring attitude holds up against 30-40% taxation.

Real Tax Rates

Above, I said that the medicare tax rate on wages is 2.9%. But, the government says that the rate on the worker is only 1.45%, with the employer paying an equal amount. The same claim is made for Social Security taxes of $6.2% on your gross wages, up to a wage limit of $106,800 in 2009. The employer pays a matching amount, sending a total tax collection of 12.4% to Social Security.

Wake up. You generate all of the wealth that pays your salary and all of the taxes associated with your employment. The employer writes a 1.45% + 6.2% check, but you produced that value, and it would be part of your take-home pay if the burden did not exist on the employer. Competition for skills would arrange that outcome.

In the same way, when a company pays for your health insurance, it is merely writing the check with part of your production. That value doesn't show on your pay stub, but you could receive that value in salary if the employer did not pay that expense on your behalf.

You may object that your employer is not now providing health insurance to you. In this case, your productivity does not support that expense for the employer. If the government decides to force the employer to provide health insurance, that cost will either come out of your current pay (the employer will offer less salary to you), or you will be fired.

Government-Run Health Care Works So Well! All that recordkeeping. Who would have thought that we needed even more.
12/25/09 - Advice Goddess Blog by Amy Alkon
Amy Alkon has my thanks for linking to my post. That is probably why you are reading this. (amg)

[edited] "New York's Medicaid system, the state's largest single expense, lost at least $92 million to improper payments, billing errors, and poor recordkeeping during the last five years."

20-Somethings Will Pay for Big Government Pay up. Your elders know better what to do with your money.
09/16/09 - Cato@Liberty by Daniel Griswold

Younger workers are healthier than the general population, and many choose rationally not to buy comprehensive health insurance. Drafting young adults into health-care reform is crucial to pay for it. They would subsidize older, sicker people by paying premiums much larger than needed to cover themselves.

Six Ways the U.S. Won't Escape Its National Debt
08/25/09 - Scrivener.net

[edited] The US national debt plus unfunded promises for Medicare, Medicaid, Social Security, and federal employee/military pensions, is staggeringly, unsustainably large at $69 trillion by the end of 2009.

The seven possibilities discussed by Arnold Kling are: Muddle through, Technology to the rescue, Policy changes, Inflation, Hyperinflation, Wealth tax, and Default.

In fact, the ONLY solution for financing these promises is increasing taxes or cutting the amount actually paid, or both. It must happen. The numbers make nothing else possible, so it will happen.

USA Healthcare is First - Infant Mortality is Low

Health statistics are intentionally misrepresented to argue for socialized medicine. The major argument is that the US spends more than Europe, but lags behind in health outcomes. So, US healthcare is both expensive and inefficient. Actually, the USA has better health.

Company Paid Health Insurance is Part of Your Salary We'll tell them that we are taxing the employer. They won't figure it out.

Your productivity supports all taxes and expenses that your employer sees as part of employing you. If those expenses become too great, then the employer cannot offer that job to you.

Medicare Myth: Low Administrative Cost We have millions of administrators in government, with more on the way

Medicare claims 3% administrative overhead, compared to 12% for private insurance. But, Medicare doesn't count all of its expenses, and private insurance is burdened with taxes that are part of its "overhead". Medicare overhead per patient is actually 25% more than for private insurance.

Healthcare Posts

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