Tag Archives: entitlements

Health Alerts

Entitlement Madness, Part II

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At nearly $86 trillion, Medicare's unfunded liability is almost six times the size of Social Security's. Unfortunately, there's no easy way out. If we were to end Medicare tomorrow, collecting no more payroll taxes and allowing no more benefit accruals, we would still need $32 trillion in the bank right now to pay for the benefits people have already earned!

In the meantime, the cash flow deficits in Medicare and Social Security are on a course to crowd out every other federal program. As I explained at the National Journal Health blog, we cannot pay benefits with Trust fund IOUs that the government has written to itself. So to cover these deficits, we will need one in ten income tax dollars in 2012, one in four by 2020 and one in two by 2030.

Ah, but here's even more depressing news. Awful as all these numbers are, the reality is even worse. The reason? To estimate future Medicare spending the Social Security/Medicare Trustees and the Congressional Budget Office (CBO) must forecast health care spending as a whole. And neither agency is forecasting the actual path we are on.

httpv://www.youtube.com/watch?v=FkZLgJKQ46w

Let Me Help

Continue reading Entitlement Madness, Part II →

Health Alerts

Entitlement Madness, Part I

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In the near future, the Social Security/Medicare Trustees will produce their annual report. Gloomy as the report will no doubt be, it will likely be a whitewash of the underlying reality. If the past is a guide to the future, the release of the report will focus everyone's attention on the trust funds (which scholars understand have no economic importance whatsoever) and ignore the huge unfunded liabilities we keep piling up and the severe cash flow problems elderly entitlement programs are already creating.

These obligations are especially important in light of the enormous increase in unfunded liability and cash flow deficits that are about to be added. Currently, about 100 million people depend on Medicare and Medicaid for their health care. Under President Obama's new health reform plan, an additional 100 million or so could be enrolled in public and quasi-public plans with the entitlement guarantee that their premiums will not exceed 10% of family income.

httpv://www.youtube.com/watch?v=PMJlIFo3XG4

Ground Control to Major Tom

Continue reading Entitlement Madness, Part I →

Health Care Costs

Kaiser Survey

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The Kaiser Family Foundation has released a new survey. It finds that people are having a hard time paying their medical bills. It doesn't mention that they are also having a hard time paying their bills for food, housing, transportation, education, or any of the other necessities of life. Once you get past the headlines, some interesting things crop up. For instance:

The number of people reporting problems in paying health care bills (22%) has actually dropped from last October (32%).

The care they are skipping is mostly non-essential. 35% are using home remedies or OTC drugs, 34% are skipping dental care or "regular checkups," 27% postponed getting a health care service they needed, and so on. In fact, people are less likely to do things they shouldn't do anyway, like going to a doctor when they have a cold or the stomach flu or having a yearly physical exam. 6% said they postponed an outpatient surgical procedure and 5% postponed an inpatient stay, but the survey doesn't mention if these were elective procedures.

The survey finds that "health care reform" is the public's fourth most important priority, after fixing the economy, reforming entitlements, and fighting terrorism. But people are divided on what they mean by "health care reform" with equal numbers saying either it means lowering costs or it means helping the uninsured.

Substantial majorities think "health care reform" should be accomplished without spending any new money or changing their own arrangements.

Medicare

It’s Today: Obama’s Summit

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Many Democrats (according to the New York Times) are upset that President Obama is even bringing up the issue of elderly entitlements. Will it do any good?

Let's start with the basics. We can begin by recognizing the problem – which too many Democrats (and even some health economists) have been denying for way too long. This may require an "intervention," and maybe even 12 step rehab. But there is no way we are going to get agreement on a solution, until we get agreement on the problem.

According to the Trustees, the unfunded liability in Social Security and Medicare is more than $100 trillion dollars (that's trillion, not billion), or about 6 ½ times the size of the entire US economy. That's the size of our commitments over and above expected premiums and dedicated taxes, measured in current dollars. [link] Continue reading It’s Today: Obama’s Summit →

Health Care Costs

Aging Trumps Health Cost Growth as the Main Cause of Future Misery

This is from Andy Biggs' American Enterprise Institute paper on the causes of our future entitlement spending crisis:

  • A new consensus on entitlement reform has developed in Washington: rising per-capita health care spending is the only real crisis besetting the government's entitlement programs, while America's aging population and Social Security play minor roles at best….But this new consensus is flawed.
  • Over the next twenty years, fully 60 percent of total entitlement spending increases will stem from population aging. It is not until 2045 that per-capita health care spending growth becomes the more important factor.
  • In present-value terms, over the next seventy-five years, Social Security, Medicare, and Medicaid will cost an additional 5.7 percent of GDP, and the cost increases will be split almost evenly between population aging and excess health care cost growth.