Back at you . . .

I'll be away from Your Intertubes until Sunday, so here's a drive-by post until then, based on your comments to the bit about the future of Medicare.

Mr. Gunn suggests applying the American Enterprise Institute Global Warming Correction Factor, thereby making the problem disappear and hallucinating the problem we want to worry about. While that is tempting, we here are in the Reality Based Community because it seems to be coming back into fashion, and we want to be in with the in crowd. C. Corax's suggestion, that by eliminating social security and letting the old folks starve, we can simultaneously contain Medicare costs, is indeed reality based but perhaps the AARP will have sufficient political clout to resist it.

Ana notes that predicting the future depends on assumptions that the world will go on more or less as it is now, except for obvious current trends. That is so. Most of the risk here would seem to be on the downside, however. The GAO's projection is based on economic growth continuing at the average rate since WWII; life span continuing to increase at about the rate it has been lately; and health care costs continuing to increase as they have been, which is actually a kind of optimistic assumption since the driving force is continuing advances in medical technology.

The life span question actually doesn't matter all that much. Even if the U.S. life expectancy stalls out or goes down a bit, the number of elderly people will continue to increase because there are so many people now in their 40s and 50s. And, even if they live to be 80 instead of 83, it won't affect Medicare costs very much because a big chunk of the money is spent on people in the last year of life, regardless of exactly when that happens. Ditto with Medicaid: it's mostly going for people in terminal stays in nursing homes, whatever age they may happen to be.

Failure of GDP to grow as expected would just make the problem worse, of course. But increasing medical costs we can actually do something about. In fact we have to; the question is whether it happens in a just and humane way, or results in a dramatic increase in social inequality. I'll get to that.

Roger wants to know why Social Security remains nearly constant as a percentage of GDP, even though a larger proportion of the population is retired. The reason is that when you retire, your social security benefits are fixed for life, based on the average earnings during your working years. After that, they are only indexed to inflation. But, the GAO assumes that GDP per capita will continue growing. So, as retirees live out their lives, each one of them consumes, year by year, a smaller percentage of GDP. Medicare and Medicaid, however, increase with health care costs, which exceed not only the rate of inflation, but the rate of GPD growth. Your benefits are not fixed at retirement, but represent an open-ended commitment.

Ferdzy and Kathy both note, one way or another, that part of the reason this is a problem is because there are competing demands, specifically military spending and interest on the national debt. Actually, those aren't entirely competing. A big reason we have a national debt, and will have a bigger one in the future, is because we choose to spend our treasure on fighting wars and building machines to blow up people and stuff.

As Roger points out, Medicare and Medicaid spending also represent consumption. They represent spending on something which is valuable to people, they are part of the GDP and unlike war spending, there is a payoff, the money isn't going down the rathole. That's an important point. It isn't necessarily bad for health care to take up an increasing share of the economy. After all, we can only eat three meals a day and there's little point in having houses bigger than we need or 198 pairs of shoes. As basic necessities become more affordable, of course we spend more of our income on other things. So the question is not, will Medicare and Medicaid cost more in the future than they do today, the questions are 1) will it be worth it and 2) will the political process result in equity and justice in the way our health care dollar is spent.

As Ferdzy notes, it looks like it won't, because those increasing Medicaid costs ipso facto mean more impoverishment. Furthermore, if Medicare and Medicaid really do get to be 20% of GDP, will taxpayers -- or rather the politicians who answer to the wealthiest and most powerful taxpayers -- be willing to fully fund them? Most people think not, especially since we will also have that huge interest bill and the 20 year war with Oceania to pay for. The result will be increasing gaps in coverage, or much more difficulty getting onto Medicaid. Remember that right now, most elders who wind up on Medicaid do so because they need long term care, and they have to completely wipe out their savings and become destitute before they are eligible.

So this is a real problem, but it doesn't have to be. We could afford it if we wanted to, although a good part of that spending is inefficient and we should not spend money that doesn't buy what it's worth. But we're unlikely to end up spending that much, which means some people will get screwed.

My final answer next time.