Our Coming Medicare Debacle

By Megan McArdle

I am reliably insured by all the progressives in my Twitter feed and comment section that this bill will pay for itself.  Along with the CBO and the Centers for Medicare and Medicaid Services, I have my doubts.  But say it's true.

Now what?

We still have a gigantic budget deficit pressing on us from Medicare.  Yes, you say you made serious Medicare cuts.  Then you turned around and spent that money on expanding coverage.  So the Medicare deficit, which will be $100 billion and growing in 2019, will still exist.  There will also be growth in the portion of Medicare that is currently paid for out of general revenue, putting further upward pressure on our deficits.  It's impossible to say exactly how much that $100 billion will be growing every year, but $15-20 billion seems like a reasonable estimate, as least during the senescence of the Baby Boomers.

This is why the argument that "If we can't make these cost cuts, we can't cut Medicare costs, so we're doomed anyway" is such a silly, facile argument. "Medicare cuts" are not some undifferentiated substance, which one consumes or doesn't as if they were cigarettes or baby carrots.  Medicare cuts range from easy to hard, and we just used up the easiest ones--cuts which, if you'll notice, weren't all that easy.  Doing this bill means it will be even harder in the future to cut Medicare, because the cuts we will have to make will almost definitionally mean deeper service cuts, and greater political controversy.  

Now, perhaps this bill will "bend the curve" and lower the rate of healthcare inflation.  But as I understand it--the details of this bill are still emerging from the thicket of legislative language--the deepest cuts are still found by altering the growth formula for provider payments.  This is not curve bending, it's haggling, and these are the sort of cuts which have so far proven the least able to withstand interest group pressure.

So we aren't done talking about healthcare.  We haven't even really started.  Our budget problems loom as big as ever, and we just used up both political capital, and some of our stock of tax increases and spending cuts, to pay for something else.

This article available online at:

http://www.theatlantic.com/business/archive/2009/12/our-coming-medicare-debacle/32414/