Map of life expectancy at birth from Global Education Project.

Friday, December 17, 2004

Social Security crisis phony, Medicare crisis maybe not. . .

While the Bush administration is ginning up a largely fabricated imminent (or is it grave and gathering?) threat to Social Security, in order to panic the public and Congress into destroying the system, there are some real problems with Medicare. A reasonably good summary of the problem can be found at Health Affairs, by Mark Pauly .

Pauly writes: A key message, then, is that real Medicare benefits per beneficiary could be held constant, at approximately current tax rates, if overall economic growth is near the historical level; if it falls slightly below that level, tax rates would need to rise a little. However, it would be much more discouraging if real Medicare benefits continue to grow at their long-term real rates of 4.7 percent per year, or even at the more moderate rate of GDP growth plus 1 percent used in the trustees’ projections. Then revenues at constant tax rates would fall well behind spending, the Part A trust fund would be drawn down, and taxes would need to be raised or benefits would need to be limited. All of these projections exclude the MMA drug benefit; its estimates are very imprecise, but it will probably add at least 20 percent to Medicare taxes upon initiation and grow thereafter.

In short, while we wouldn't have a big problem if health care costs per capita were to hold steady, they don't. The cost of health care per capita, and as a share of GDP, has increased steadily over the decades, with some brief interruptions, and is still increasing. Bottom line? The looming crisis in Medicare is just a subset of the problem we have with health care overall. And the solution is also the same:

Universal, single payer national health care. That is the way to get control over costs and make sure we can take care of our seniors, our children, and our working age people. It will not, however, be good news for drug companies, which is one reason they are paying Billy Tauzin $2 million a year -- to make sure it never happens.

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