At the National Journal Health Blog, Marilyn Serafini asked, "How much does health reform really cost, what elements are worth it, and what are the best and worst options for paying for it?" She invites bloggers to compare the current situation with the passage of Medicare and Medicaid in 1965. [link] Here is part of my response:

Here are five lessons from the Medicare and Medicaid experience:

  1. The cost of Medicare and Medicaid was way beyond what anyone predicted. The reason: failure to realize that when any good or service becomes free, people will consume more of it.
  2. Once started, these programs are extremely hard to curtail. If we ended Medicare today – collecting no more taxes and allowing no more accrual of benefits – we would still owe $33 trillion in benefits already earned! (Results of new NCPA study.)
  3. Looking indefinitely into the future, the Trustees have calculated there is an unfunded liability (promises made over and above expected premiums and dedicated taxes) of $85 trillion – almost six times the size of the entire economy.
  4. According to Amy Finkelstein, although Medicare was financially important to the elderly, it created no discernable health benefits in terms of reduced mortality. [link]
  5. Despite no measurable health benefits, the explosion of spending on these two programs forced up prices for everyone else. In fact, HHS' own internal estimates suggest that every $1 of additional spending buys 57¢ of higher prices.

"Memories Are Made of This"

Comments (4)

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  1. Devon Herrick says:

    Most people understand how making something free could increase consumption. For instance, if T-bone steak is on sale, you will likely buy more than if the price has just doubled.

    However, what many people fail to understand is how the Medicare program also affected the treatment patterns of doctors and hospitals. Once seniors no longer had to pay for hospital stays, treatments became much more aggressive. Doctors began to prescribe more medical interventions — including unnecessary treatments, excess diagnostic testing, surgeries with little hope of success, etc. Overtime medical technology advanced due to this boost in funding. You could argue some of this added spending is good. But it’s also safe to say much of it is ineffective, unnecessary and (according to Dartmouth) unhealthy.

  2. Larry C says:

    Devon, the bottom line is: huge increases in health care costs (for the elderly and everybody else) and no apparent improvement in health outcomes.

  3. Robert says:

    If I’m not mistaken, there is also a parallel with the new Medicare prescription drug benefit. What mainly happened was a huge shift of financial burden from seniors to taxpayers with only a very small increase in the number of actual drugs taken by elderly patients.

  4. Dick R. says:

    Does anybody at this blog honestly think that anyone in Washington cares one fig about learning from past mistakes? Get real.