NCPA - National Center for Policy Analysis

Obama Murdered Medicare

October 18, 2010

The health care reform law will have a devastating impact on elderly and disabled Medicare enrollees if its provisions are not substantially changed, say Thomas R. Saving, former public trustee of Social Security and Medicare and director of the Private Enterprise Research Center, and John C. Goodman, president, CEO and Kellye Wright Fellow of the National Center for Policy Analysis.

The law creates a new mechanism to reduce the rate of increase in Medicare payments to doctors and hospitals.  As a result, Medicare payments will fall below Medicaid rates before the end of this decade, and they will fall increasingly behind the rates paid by all other payers in succeeding decades.

Compounding these problems is the fact that the legislation will create a huge rationing problem system wide, say Saving and Goodman.

  • Although the law is expected to create as many as 34 million newly insured people, all funds to create new health care providers were zeroed out of the bill.
  • Subsequently, the administration has promised new funds to increase supply, but they will be nowhere near the increase in demand.

Additionally, Medicare spending cuts will create enormous financial stress for the nation's hospitals.

  • According to the actuary's office, more than one in seven health care facilities will be unprofitable before the end of the decade.
  • That number will climb to one in four by 2030 and to 40 percent by midcentury.

One way to think about these changes is to consider the reduction in spending on Medicare beneficiaries relative to the expected path prior to the legislation.

  • Under the new health care law, the average senior on Medicare will receive $2,300 less in annual benefits within 10 years and $3,844 less after 20 years.
  • By midcentury, average spending per beneficiary will be $9,413 less than it would have been.

Instead of encouraging draconian price controls that will drive doctors and hospitals out of the market, we should allow the market to respond to patient needs, say Saving and Goodman.

Source: Thomas R. Saving and John C. Goodman, "Obama Murdered Medicare," Washington Times, October 15, 2010.

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