NCPA - National Center for Policy Analysis

Don't Forget Medicare's Troubles

December 23, 1998

Analysts caution that Medicare must not be ignored in the debate over Social Security reform. The former has problems that Social Security does not have.

  • Medicare is already spending more than it is taking in, whereas Social Security won't go broke until about 2013.
  • Medicare payments go for the most part to providers, whereas Social Security payments go to beneficiaries.
  • Despite attempts at controls, there is no specific cap on individual or total Medicare payments -- whereas there are specific limitations on Social Security payments.
  • Every Medicare beneficiary has his or her own definition of Medicare needs, while every Social Security recipient has the same definition of what money is.

To illustrate the difference, imagine that the government provided an elderly person with groceries the same way it doles out Medicare benefits. since the individual would not be paying the grocery bill, there would be no incentive to budget. As costs to the government escalate, it tells the grocer that reimbursements will be reduced. So the grocer reduces the variety and selection of the goods sold.

Analysts point out that is exactly what is happening with Medicare. although exciting advances in medical science ought to be cause for rejoicing, they are viewed with alarm because they have the potential for raising Medicare costs.

The way to avoid these pitfalls, experts suggest, is to move to a system of fully funded retirement health care. The elderly should be able to buy real health insurance against the risk of catastrophic illnesses -- instead of simply preparing for health care. A vastly scaled-down Medicare program would be the insurer of last resort. Patients and their doctors should make the health care decisions.

Source: Pete du Pont (National Center for Policy Analysis), "Saving Medicare's Dwindling Future," Washington Times, December 23, 1998.


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