NCPA - National Center for Policy Analysis

Mediscare: The Surprising Truth

May 27, 2011

The Obama administration has repeatedly claimed that the health reform bill it passed last year improved Medicare's finances.  This claim is true only because ObamaCare explicitly commits to cutting health care spending for the elderly and the disabled in future years, say Thomas R. Saving, a senior fellow, and John C. Goodman, president, at the National Center for Policy Analysis.

Almost no one familiar with the numbers thinks that the planned cuts are politically feasible.  But suppose the law is implemented just as it's written.  In that case, according to the Medicare Trustees, Medicare's long-term unfunded liability fell by $53 trillion on the day ObamaCare was signed.

But at what cost to the elderly?

  • Under the new law, the average amount spent on people reaching age 65 this year over the remainder of their lives will fall by about $36,000 at today's prices; equivalent to about three years of benefits.
  • For 55-year-olds, the spending decrease is about $62,000 -- or the equivalent of six years of benefits.
  • For 45-year-olds, the loss is more than $105,000, or nine years of benefits.

In terms of the sheer dollars involved, the law's reduction in future Medicare payments is the equivalent of raising the eligibility age for Medicare to age 68 for today's 65-year-olds, to age 71 for 55-year-olds and to age 74 for 45-year-olds.

Are there better ways of solving the problem?  Yes, say Saving and Goodman.

  • First, there must be general system reform.
  • Second, if federal spending is to be contained, young people need to be able to save in tax-free accounts during their working years in order to replace the dollars they will not be getting from Medicare.
  • Finally, providers need to be able to repackage and reprice their services under Medicare in ways that lower costs and improve quality.

Source: Thomas R. Saving and John C. Goodman, "Mediscare: The Surprising Truth," Wall Street Journal, May 27, 2011.

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