... I thought I'd post a self-serving book feature that I dashed off for a local periodical that literally just serves a couple of blocks in the West Village (so not much circulation).
PAYING FOR MEDICARE
It isn’t easy to promise people $18 trillion of completely unfunded benefits, apparently under the pretense that nothing need be paid for, and yet to make no one happy. This, however, is what the Bush Administration appears to have accomplished with the new Medicare prescription drug benefit that it pushed through Congress in 2003. ($18 trillion, by the way, is the long-term cost of the benefit according to the Medicare Trustees.)
In my recently published book, Who Should Pay for Medicare?, I discuss the approaching fiscal crisis that the enactment of the prescription drug benefit only made worse. I also address the unpopular questions of how we should, and how we probably will, pay for senior healthcare that everyone agrees is important but seems to think our society can get for free.
Medicare’s financing problems partly arise from the aging of America’s population, due both to lengthening lifespans and lower birth rates. An even bigger cause, however, is that healthcare expenditures, for young as well as old, are growing faster than the economy. This trend reflects technological advances that really have made people’s lives longer and better. Strangely, however, studies show that, while America spends far more money per capita on healthcare than peer nations such as Canada and the United Kingdom, we do not seem to get any extra payoff in terms either of results or customer satisfaction.
Making people – the young as well as the old – pay more at the margin for the treatment they get will have to be part of any solution, unless we go to a nationalized healthcare model with queueing. There is no sign, however, that politicians, Democrats as well as Republicans – or, for that matter, voters – are prepared to start considering the hard choices that ultimately will have to be made. The solution that is ultimately adopted is likely to involve new taxes and a period of disruptive inflation, as well as tougher healthcare limits than would have been necessary had we acted sooner.
While Medicare has done much good, it ought to be more of a genuine insurance plan, with greater high-end protection (such as catastrophic coverage) and less funding of routine expenditures. The way it is structured now, it resembles car insurance that pays for your gasoline but will not help you if you have a major accident. Structuring Medicare to please voters rather than to do its job well is a luxury that we possibly could have afforded if the U.S. government’s overall long-term fiscal picture were not so dire. As things look now, however – especially given the Bush Administration’s five-year spree of tax cuts and wild spending – Medicare may have to change surprisingly soon. I certainly hope that the people who read this article will be financially prepared for whatever happens.