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The high-stakes showdown over Medicare reform

Dr. Mark W. Hendrickson's picture

go broke in the year 2024 — five years sooner than was projected just last year.

The millions of Americans who have been counting on Medicare to be a reliable, stable guarantor of affordable healthcare in their senior years should be asking themselves, “Who is responsible for this predicament?” The short answer is “lots of people,” but let’s start by looking in the mirror.

The shameful status of Medicare brings to mind a sequence in the movie “Animal House.” A freshman pledge, Flounder, let some upperclassmen in the fraternity use his brother’s brand-new Lincoln for a road trip. Naturally, the brothers trashed the car. As Flounder wept in regret, the suave, smooth-talking senior, Otter, put his arm around Flounder’s shoulder and explained the facts of life to him: “You [goof]ed up; you trusted us.” (“Goof” replaces the original R-rated verb.)

“We the people” have goofed up big time, trusting a government bureaucracy to oversee our healthcare.

When will we learn that gigantic bureaucracies — undisciplined by the profit-motive and insulated from the normal competitive pressures of the marketplace — are inherently inefficient?

And when will a majority of Americans take a sober look at Uncle Sam’s track record and recognize his chronic incompetence? Consider:

Government meddling, abetted by misregulation and a compliant Federal Reserve, generated the housing bubble/bust that has caused the market value of most Americans’ most valuable asset — their home — to decline, plunging millions into negative equity.

Chronic federal overspending has impelled a weaker currency and higher prices of daily necessities.

The quackery of government stimulus spending has produced anemic economic growth; the usual result when the government share of a country’s GDP dramatically expands.

The government-run Social Security Administration will henceforth operate in permanent deficit — a grotesque malfeasance that would have resulted in the imprisonment of private executives who perpetrated such a swindle.

With a record like this, how could anyone trust government to get it right on healthcare? The big question now is: Why are so many Americans opposed to Congressman Paul Ryan’s attempt to put Medicare on sounder financial footing?

Part of the resistance to fixing Medicare may be simple partisan loyalty — i.e., Republicans are the enemy; oppose everything they propose.

Part of it may be fear of change.

Part of it may be the seductive belief of “the free lunch” and a corresponding belief that Congress simply has to raise taxes on somebody else to obtain necessary funds.

Part of it may be that Americans believe, “We paid for it, so it’s ours.” Well, yes, we’ve been paying for Medicare via payroll deductions for decades, but no, our promised benefits remain unfunded due to government mismanagement. (We [goof]ed up; we trusted them.)

Part of it may be what economists call “short time horizons” — that is, focusing on the short run instead of the long run. Many seniors tend to do this. So do many politicians with their fixation on the next election. In economics, short-time horizons are highly correlated with poverty; in other words, ignoring the long term is why many people are poor.

Many of those on the extreme left oppose reforming Medicare for another reason entirely: they desire a state-run monopoly of healthcare. They prefer a socialized healthcare model. To attain that goal, the left needs to merely block reforms to Medicare. Gridlock and stalemate will assure Medicare’s eventual bankruptcy and therefore its subsequent nationalization (a la Fannie Mae and Freddie Mac).

Early polls show stiff resistance to Congressman Paul Ryan’s proposed Medicare reforms. If the Republicans can sell the public on the need for reform, then Medicare’s solvency may be prolonged. If the public repudiates Ryan’s plan by returning a Democratic majority to the House while re-electing Barack Obama to the White House, then a government takeover of the healthcare industry is all but assured.

The stakes in the next election are enormous. The Medicare reform contest could be the one for all the marbles.

[Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City (Penn.) College.]

Comments

Cong.Ryan and conservatives talk about "reforming' Medicare. Do not believe them because they lie. Their goal is to abolish Medicare. The extreme and irresponsible right wing of the Republican Party has always opposed Medicare and now controls the GOP. To them ideological purity is more important than health care for our citizens.

lion

Mike King's picture

"Cong.Ryan and conservatives talk about "reforming' Medicare. Do not believe them because they lie."

Pretty serious allegation. Would you possess the ability to substantiate it?

Reform has a meaning: Private enterprise to furnish it.

You would have to go to the doctor and hospital that your particular private insurance company took on the last time they negotiated the coverage. May be a new one next year----in Alabama.

If they went broke they would want bailed out by the government so that the old guys would have some insurance!

Same with Social Security and Medicaid.

Even the Military retired health insurance would go up for bids.

Pensions so.

Capitalism won't win this horrible thing!

Why is it that there are no thinkers anymore as to consequences?

Mike King's picture

You may be able to answer my challenge to lion, but you didn't. Reread the quote and give it a try, but before you do allow me to suggest you take your medication. We don't need another acid flashback, now do we?

Gort's picture

King, republican’s are great at saying one thing to get elected and doing another when they get into office. The mid-terms were all about “Jobs, Jobs, Jobs,” but the Republican led house haven’t passed a single piece of legislation in that area. Instead they come out with the Ryan Budget plan that will move more and more retired people from the ranks of the middle class into poverty.

If the Republicans are successful with this first step to kill Medicare can you offer proof they won’t come back later and ask for more and more as time goes by? I don’t think you can and that's proof enough for me.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

Mike King's picture

The same can be said about democrats prior to being elected, but that's national politics.
I'm sure you realize that the single most significant hurdle to job creation (private sector) is unchecked federal spending, which has caused an addiction to borrowing against the sweat of our grand kids. Can you name one thing your side has done toward that end?

I believe you are saying that too much federal spending is the cause of a shortage of jobs! They are spending more on people than they have and have to borrow the rest!
Is that correct?

Now from that I would assume that you think is if we cut corporate taxes, even the little store fronts, then that will cause them to hire more people.
Is that correct.

I also assume that we should not cut ordinary workers taxes since we need that big chunk of money for the budget.
Is that correct?

Looking down the road, assuming, we do those things, I see corporations paying higher dividends to rich people who own the stock, higher wages to executives and larger bonuses, and inflation which will kill the retired on fixed incomes!

If there is any of that non-paid company tax left after that, maybe they will hire a few people providing the middle class buys more of what they produce.

All of that produces those with jobs and money and those without jobs and no money (about 20% right now--not counting those paid with tax money).

We might soon be in the same condition as we were in 1929 as far as money distribution is concerned, and if we don't do exactly what FDR did, we will stay that way and be another Spain, Greece, and a hundred other countries with certain privileged people.

Capitalism can build jobs better than the government, but they don't know when to slow down. We have three years of commercial structures now and maybe more than that of houses.

Banks still have false assets on their books due to the derivatives horror by real crooks. More yet to go broke.
The government is closing the banks slowly so as not to create an immediate Depression.

If the above rules aren't followed then the theory of bail-out must be applied to survive.

Observerofu's picture

not fixed it.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

involving persons who have valid points. Skip Oou's cliches. . .and this is an enlightening discussion. Thanks!

Observerofu's picture

history or at least will learn it before commenting and don't screw it up.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Gort's picture

OofU, I got a history lesson for you? Check out my next post.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

Gort's picture

Mike King, most people are willing to throw up their hands, blame both sides, and accept the.., “that’s national politics,” argument, but not me.

The single most significant hurdle to job creation in the private sector was the Republican Party refusing to deal in good faith on any issue for over 10 years. The addiction to borrowing in earnest started at the same time. Now its time to start paying the bills and the Republican’s insist it be done on the backs of seniors and future seniors.

Seniors of the future will need Medicare for the same reason current seniors need Medicare now. Accepting the Ryan Plan means you have already sold out our children.

When our children reach the age to qualify for Medicare they will get vouchers instead. The vouchers will not cover the cost of insurance. As time goes by, more and more will move from the middle class to the poor because of the high cost of insurance and medical procedures. If you think this won’t impact the life of your grandchildren then perhaps you should think about it again.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

Mike King's picture

It's awfully hard to convince me that it's only the Republicans that are to blame. After all, would you like to expound upon that $857B that was to insure unemployment remained below 8%?

Don't get me wrong, if I had it my way 537 elected officials would be dragged from their DC offices, tarred, feathered, and rode to the edge of town on a rail.

8% or 9%. Is what is significant about that I'll bet is that President Obama said it!

It is more like 20% then and now, anyway. Or depending upon how one looks at who earns te bread, it couild be said it is 40%, not including tax paid people.

Actually 50% of us earn the money to support the other 50%!

Dragging 537 sounds like overthrowing the government and subbing TEAS! Elected of course.

Gort's picture

Mike King and Spyglass, it really doesn’t matter who I hold responsible. I don’t claim to be anything more than a hard headed working guy that lives on a cul-de-sac in Coweta County.

If you want to blame Rep and Dem, that’s fine with me. Go in peace with my blessing but that doesn’t change my opinion about what the Republican’s have done and what they are doing now.

It is my opinion the Republican backed Ryan Plan is the first step in killing Medicare for everyone and will result in more and more seniors moving from the middle class into poverty.

Your children and grandchildren will need Medicare for the same reasons current seniors need Medicare now. If you buy into this Ryan Plan, you already sold out your children and grandchildren, when they become seniors.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

NUK_1's picture

I thought the Ryan plan was a good starting point to work from on a serious debate about Medicare reform but it needed some work. The Dems in their hyper-partisanship BS immediately saw it as a political football to kick around some and try to give them some political life after getting demolished in the last election cycle by a historical margin. The atmosphere of nothing but pure partisanship and political theater is toxic and the Repubs and Dems have equal amount of blame in that completely. So does the President who lied...err.."campaigned" about how he was going to change the culture and then immediately since he took office has done nothing but poison the waters even further than before.

Ryan's plan needs revisions and it needs more careful examination than the proponents(LOVE IT!) or detractors(DESTITUTE SENIORS EVERYWHERE!). The cost-shifting to the recipient from about 25% to 55-60% is obviously pretty drastic, but so are a few hundred million bucks in "savings" that were very vague and ill-defined by Ryan and seemed to be complete wishful thinking, much like Obama budgeting where money is some how saved by undefined increases in efficiency.

What's been lacking in DC for quite a long time is any sense of honesty or integrity of telling Americans: look, u want this, this is the cost now and how it will grow. Now, it's either pay taxes to afford it or reduce "somewhere else," or you get will have to get by with less.

Unfortunately, the same problem as above has crept down into local governments who lack the courage to tell their citizens who want fantastic services but pay a Big Lots price for them that they are delusional and need to get a clue. And take Econ and Finance 101 already.

Gort's picture

NUK_1, while you look at the Ryan Plan as a good starting point to debate Medicare Reform, I look at it and say it’s the Republican’s first step to totally killing Medicare for everyone.

Why? Simply stated, I just don’t believe the Republican’s ever negotiate in good faith. I say it because that’s what I’ve witnessed for the past 10 plus years.

It’s okay with me if you want to blame the Rep, the Dem, or both. As I told Mike King,

[quote] Go in peace with my blessing but that doesn’t change my opinion about what the Republican’s have done and what they are doing now.[/quote]

Answer me this one question. If the Republicans are successful with this first step to kill Medicare do you really believe they won’t come back later and ask for more and more as time goes by?

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

BHH's picture

after your trainer lets go. I you fall the trainer will help dust you off and start you over.

If someone wants to learn to swim, they have to push off and let go of the side of the pool. If they start drowning you thrown them a life preserver, not grab hold of them and sink with them.

No one wants to kill Medicare but it needs to acquire better balance and buoyancy.

pyramidman

Gort's picture

BHH, so you think no one wants to kill Medicare, eh? Tell me what you mean by

[quote].., it needs to acquire better balance and buoyancy. [/quote]

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

BHH's picture

It's fixing it.

pyramidman

Observerofu's picture

Is what you are attempting with Gort. He is a big Government, Government can fix all type and it's all one parties fault. In other words clueless.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Gort's picture

OofU, well look at this, I poked the bear! Nice to hear from you buddy! I bet you and your TeaParty friends are going to be busy as bees this summer, eh?

I hear your masters, the Koch Brother’s, kicked in another $12M to FreedomWorks to train the TeaParty how to disrupt town hall meetings again this summer.

Your mission OofU, if you care to accept it, is to hold up a blank piece of paper and shout in mock indignation, “THIS IS THE DEMOCRAT PLAN TO FIX MEDICARE!”

Let me know where you’re performing, okay? I might even come out and watch you in action.

BTW, do you think the Koch Bros. are spending their own money or is that the money they get off taxpayers from oil subsidies?

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

Gort's picture

BHH, how do you plan to fix it? The Ryan Plan?

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

BHH's picture

plan,but let me relate a true story to you.

I was the senior firefighter in charge of the interior suppression crew on a working house fire. One entire room was well involved with extension into the attic.

We began the initial attack with 500 gallons of water (maybe 3-5% of the water needed to do the job) from our engine/pumper while the second engine in was laying a supply hose to the nearest hydrant. That hydrant was out of service due to freezing conditions so he continued laying hose to the next hydrant.

As soon as I heard the traffic on the radio that there was no water from the hydrant our approach changed. We applied water just until the flames were knocked down and blackened out. I ordered the nozzles shut off. Then we waited and watched until the fire rekindled to the point of burning freely again and we knocked it down again.

The supply truck found the next hydrant dry due to freezing also. Mean time a third engine arrived which gave us an additional 500 gallon of water. We continued our water conserving strategy for what seemed like 45 minutes but was probably only 25. The nozzles were delivering about 125 gallons per minute so every second of water flow saved was valuable.

Well luckily the supply pumper had only laid a single supply line which doubled the distance is was able to supply from and the hydrants were plentiful enough that the third one was within it's reach. And the third one was the charm that provide the continuous supply that was needed to complete the job.

This strategy bought plenty of time to gain the resources needed and the damage was contained to the area of damage that we found on arrival.

If we had gone in and dumped all available resources on the fire initially it would most likely have had the same end result as if we had just stopped and said well we don't have what it will take to extinguish it and did nothing.

I hope you enjoyed the story and can see how it may apply in this case.

Oh, by the way, we didn't have to kill any children or old people to regain control on the situation.

pyramidman

Gort's picture

BHH, if you don’t know much about Medicare, Ryan, or his plan, then why do you think you’re qualified to school me on the subject? < 8 - )

Now about your story, unless the house was abandoned, it probably had insurance to protect the owners from a financial loss.

That is the same reason why seniors need Medicare. Medicare is the insurance program that protects seniors from high insurance rates and expensive medical procedures.

Without it, more and more seniors would move from the middle class into poverty.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

BHH's picture

available while causing as little damage as possible and still keeping the situation in check.

Not to use up all the resources available with your initial strategy.

Make changes as circumstances dictate.

Open your mind.

Use a can opener if you have to.

pyramidman

Gort's picture

BHH, my mind is open, my vision is clear, my heart is pure, and my cause is noble!

If we allow the Republicans to deny Medicare to our children and grandchildren, they will never get it back. The Republican would then come after current seniors and whittle away at their benefits as well.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

BHH's picture

but it's very rusty in there.

Bad Republicans, bad Republicans. They give you the bad news.

Funny how more Democrats every day are beginning to scream for help.

But they are not trying to shoot the messengers the way you want to.

pyramidman

It wasn't the Dems who took Ryan to task at the Townhall Meetings - it was the grassroot Republican base. Right?

Observerofu's picture

This might interest you.

"“It was a planned disruption,” says a GOP congressional aide. Fox News blared headlines asking whether liberals had “staged assaults” on Republican town halls.

Ruben says MoveOn members in Webster’s district circulated notices about the planned town-hall meeting to alert local supporters. “We have to make sure people understand that the Ryan budget would end Medicare in order to give new tax breaks to millionaires. When people hear it, my experience is they get very angry,”

http://swampland.time.com/2011/04/28/democrats-mobilize-on-ryan-budget-a...

Democrats wouldn't do that would they?

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

As much as the insistence that Obama was born in Kenya. Now you know I take news from Fox with a grain of salt. LOL

Observerofu's picture

Not every one is a birther Dmom like I would imagine not all of the Progressives are truthers.

I take all of the MSM with a whole shaker of salt. That's why I watch very little TV and instead read. I tend to get more fact and less fat that way.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

:-)

JeffC's picture

Darn right Democrats will ask questions. Even at the risk of attending an Allen West town hall meeting and being arrested by his goons for asking an unplanned question.

Observerofu's picture

just showing a little facts to dmom.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

JeffC's picture

It's just gonna be too nice a weekend to argue.

We'll make up for it some cold winter night before the elections start.

Have a good weekend. But be back at work Monday. My Democratic peeps are depending on your payroll taxes.

Observerofu's picture

Weekend is gonna be great. Have a Happy Fathers Day. Go hit some balls and have an adult beverage or four.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

JeffC's picture

So I am in agreement with a radically right-wing, falling off the edge of the world, Tea Party fanatic bent on the destruction of our American Keynesian economy?

Is this a great country or what?

Observerofu's picture

was that a Freudian slip. I mean it is.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

hutch866's picture

A bit off topic here, but the hutchette was wondering, do y'all have internships at the Carter Center?

I yam what I yam

JeffC's picture

Go to www.cartercenter.org, click on Get Involved then Internships. It has all the programs, their particular interest or requirements, and (mostly) online applications.

hutch866's picture

Thanks, she's looking at next summer at the earliest, but I'll tell her.

I yam what I yam

BHH's picture

When you didn't reply , I thought.

Oh, never mind, you're back and that's all that counts.

pyramidman

hutch866's picture

Never left, it'll take more then a gay teenage coward to run me off. Get back to me when you grow a pair.

I yam what I yam

BHH's picture

just like a big teddy bear.

Hey, I'm just trying to play nice and you keep slinging insults.

I was serious about the testosterone testing though.

You really ought to get checked.

In the mean time, come on try to be nice.

pyramidman

BHH's picture

The law of supply and demand controls prices.

As long as insurance pays any portion of the price, the cost will remain high whether the supply is plentiful or not.

Insurance just dictates how high.

Insurance maintains high costs rather than reduce it.

It's in the best interest of insurance to keep costs high.

When will people realize this?

Maybe when the insurance bubble busts?

pyramidman

Observerofu's picture

but we can not. Under current GOVERNMENT regulations we are not allowed to shop our plans.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Gort's picture

OofU, so you think buying across state lines is the answer? (Tsk, tsk, what ever happened to your precious 10th Amendment principles?)

I got BCBS of Georgia and I have to fight with them to pay the bills on routine outpatient procedures even when I use an in-network doctor, in-network hospital, and get their permission before I get the procedure done!

I just don’t see how buying Cigna Health Insurance of Texas is going to fix that.

In fact, I think I would find it hard to find a doctor and hospital in this area that would be willing to accept me as a patient with Cigna Health Insurance of Texas as my insurance provider.

BTW, have a nice fathers day tomorrow. See you in the funny papers.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

Observerofu's picture

If BCBS of Georgia knew you would not be forced to stay within State boundaries and you were free to "shop" around prices the Market would force prices to drop. Doctors/Hospitals could not care less what insurance covers a patient as long as it's approved.

You do know it's a Federal Regulation that stops that don't you gort?

Let the States decide the issue. The very argument in the 10th Amendment.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Gort's picture

OofU, I know you like to call it the Free Market but in reality its crony capitalism. If the market was free, completive, and affordable to most seniors there would never have been the need to create Medicare.

Just because you blind yourself to it, that don’t mean I don’t see the health insurance lobby putting their thumb on the scales, to influence laws in their favor. When the markets are truly “Free,” come back and talk to me about Medicare then and I may reconsider.

BTW, Federal regulations are preventing interstate commerce?

http://blogs.ajc.com/jay-bookman-blog/2011/04/19/ga-may-forfeit-health-i...

BTW 2, You missed the point entirely about buying out of state health insurance. The fact of the matter is most geographic locations are dominated by only a few providers. Each out of state company comes with its own rules, forms, and bureaucracy. I would expect the results to be, local doctors and hospitals would be crushed by the additional administrative costs, or not accept patience that had out of state companies as a provider.

Have a nice Fathers day.

Remember: If you think Social Security and Medicare are worth saving, vote Democratic.

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