Thursday, July 30, 2009

The ‘Promise’ of Medicare, 1965

Here is the problem with the current proposed health care reform plan now being considered by Congress:

The costs will eventually skyrocket even further and the revenues ‘promised’ to pay for it will fall at least 50% short of projections.

That is just the nature of the beast when it comes to analyzing health care bills over the past 40 years in America. The General Accounting Office (GAO) issued a report in 1975 bemoaning the fact that Medicare costs had tripled…from its inception in 1966!

Without significant structural reform such as raising the age eligibility, allowing participation according to income-need only, and addressing such critical issues as tort reform, this current health reform bill will do just exactly what Medicare did when it was passed in 1965…expand exponentially.

(Odd, isn’t it, that no one has even brought up the cost drivers from defensive medicine caused by the lack of tort reform, from President Obama all the way down? 77% of Congress are trial lawyers or have a degree or background in the legal profession…perhaps the second oldest profession on earth behind another that will remain unnamed. President Obama is a lawyer himself)

Did you know that the original charter for Medicare specifically limited the federal taxpayer exposure cost to just 50% of the entire cost of Medicare? 50% of annual costs were going to be borne by Medicare enrollees through monthly premiums. (1)

Do you know what the ratio is today? The Medicare enrollee pays 1/4 of the cost of the Medicare program; the taxpayer (and future generations who ‘loan’ us their money to pay for current consumption) pays the other ¾’s of the cost per year.

Try to imagine what this ‘public option’ will ultimately cost if the whole plan is estimated to cost ‘only’ $1 trillion. We are betting $3 trillion, minimum by 2019 if past history is any guide.

And it is pretty well proven that, try as they might, projections for raising revenue fall far short of their goals, hopes and dreams. President Hoover fell 96% short in his 1930 failed effort to balance the budget which contributed to the further demise of the economy at that time. In 1995, Clinton’s own OMB Director said that their tax increases were not going to lead to balanced budget since they projected annual deficits of over $200 billion for as far as the eye could see….it was only the explosion in the internet economy that generated the capital gains tax revenues and taxes gained from higher employment that helped reach budget balance in 1998-2000.

So we (somewhat) confidently predict that less than 50% of the proposed tax revenues on the wealthy will ever be collected and deposited in the US Treasury to pay for this monstrous increase in spending.

And wait until the auto companies, and then the steel companies and then everyone and their brother and sister in the corporate world start dumping their employees in the ‘public option’. That is the end game here for everyone in Detroit…get the taxpayers to pay for the health care costs of their employees, past, present and future. They have already admitted as much in the past.

Don’t come crying to Telemachus in a couple of years so we can say: “We told you so in the summer of 2009! Were you not paying attention?”

The point here is not to bury Caesar, nor to praise him. Medicare, and its supportive uncle, Social Security, have done wonders to pull millions and millions of our parents and grandparents out of poverty, and for that, it has been a public policy success.

But isn’t it time to admit that both programs have succeeded in setting a floor beneath which people will not be allowed to fall back through into poverty and use them to help the people who really need the assistance due to financial or health circumstances? There is no need any longer to include every wealthy, or even partially wealthy or higher-income American in both programs in order to insure universal support for both of them. Bill Gates and Warren Buffett do not need to be ‘entitled’ to both programs in order to support them.

In fact, we at Telemachus submit that the American people are generous enough and magnanimous in charitable giving enough to support these programs if they thought that every penny was going to help lower-income people across-the-board who can not afford to do it otherwise.

A structural change in both Social Security and Medicare that establishes eligibility based on income and family household wealth would send such a shock downward on the CBO budget projections computers we are afraid they would all crash in a heap in Washington, DC.

And the Republic will have been saved after all.

Isn’t that worth it?

(1) The personal share of the premium for the Medicare enrollee was $6.70...per month in 1975.


  1. Frank, this is excellent. I am posting to my Facebook page. And yes, it is odd how tort reform is no where being discussed. Great job.

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