Medicare: A Deal Too Good (Or Too Misunderstood) to Last

Today’s Managing Health Care Costs Indicator is 3:1

 Click to enlarge. Source

The New York Times had a thoughtful article on Sunday about our conflicted view toward government programs.  The reporters interviewed citizens of the exurbs northeast of Minneapolis, where a Tea Party candidate unseated a senior Democratic congressman in 2010.   The government safety net is helping many cling to middle class status – but many citizens think the government should do less, even if it’s painful today, to lower the future deficit.

One thing there is little disagreement about is that Medicare is a good idea.   The current Congressman suggested that Medicare be dismantled for those (like him) under 55 – but most of the interviewees were quite happy with Medicare. Most of them counted on it too.   That’s why most don’t worry too much about the Ryan plan to privatize Medicare becoming law.

Although most Americans think they will pay more in Medicare premiums and taxes than they will get in benefits, Americans get $3 in benefits for every $1 they pay into the system. The rest is paid for out of general tax revenue.  Medicare represents the most rapidly-rising governmental expense, and we baby boomers will be continuing to retire for   years to come.

Medicare clearly needs to either lower its spending, increase premiums for beneficiaries, or increase its draw on general tax revenue.  Medicare has been more successful at holding down costs than commercial health insurance plans – but revenue of only a third of its costs isn’t financially sustainable. Medicare might also be politically unsustainable if its current and future beneficiaries don’t realize what a good deal they’re getting.