How efficient is Medicare?

One of my critics offered the following response to my last post: "The most efficient payment system we have now is Medicare. If everyone were enrolled, payment for all services would be the same and automatic. Insurance companies would no longer be involved in the risk, which is where all the fraud and abuse occurs." His input is appreciated since it focuses the argument. Medicare for all is a commonly heard opinion, essentially the idea put forth by Bernie Sanders during the recent primaries.

Medicare is widely popular. Efforts to change it are "touching the third rail" for politicians. Who doesn't like walking into almost any medial provider, presenting a card, and getting full service. No charge if you've bought a Medicare supplement. Why not just let everyone in on this great deal?

There is one problem that most people are aware of but don't like to think about too much. The system is going bankrupt. Just to give you an idea, the present unfunded liability, which is the amount that is promised in the future for all present eligible citizens but not covered by taxes, is in the range of $50 trillion. Where's our country going to get that kind of money? Well I guess we could raise taxes.

The problem is that's already been done. Part A, which pays for hospitals and home health, is financed through the Medicare payroll tax which everybody pays. That started out way back at 0.3% of your paycheck but now it's up to 2.9% unless you make over $125K in which case it's 3.8% and, unlike Social Security, as of 1994  that applies to 100% of your paycheck. Despite these increases the Part A trust fund has been spending more than it takes in for several years and is predicted by the Medicare trustees to run out completely in 2026. That's 9 years from now folks.

For Part B, which covers doctors, lab tests and medical devices, seniors are charged a premium which is adjusted higher according to their income, and which has been increasing rapidly for everyone in recent years. Originally those premiums were supposed to cover half the bill with the general taxpayers covering the rest. For the last 10 years or so what the seniors pay has dropped to 25% with 3/4 of the cost being added to the national debt.

So for Part A we could raise the payroll tax and take more out of everybody's paychecks. That's not going to be popular considering our stagnant wages. For Part B 3/4 of the costs from the general funds seems like something of an outer limit. We could ask seniors to take a big bump in their premiums, also not likely to be too popular. In fact the amounts involved in each case are a big deal, increases probably not politically feasible.

What else could we do? Here's another idea that some are pushing. Raise the eligibility age, say to 67. Surveys show that present day Medicare recipients are OK with that. No surprise there. Younger folks not so much, although surveys also show that a lot of the youngsters don't expect Medicare to be around for them anyway. But wait a minute!! I thought we were talking about including everyone, not cutting people out. Back to the drawing board.

One other solution that no one likes to talk about is the ace in the hole. Medicare could do some serious rationing. CMS does some of that now, but not enough to be really noticeable. Nevertheless It's a big way that central payers in other countries control their costs, and we're told we should learn from them. The problem we have in our country is that we've got this private system to compete with and how would it look if the feds couldn't manage to provide the same services as the greedy insurance companies. What's worse is that those pesky companies have to do it all with just premiums. No taxpayers to back them up and definitely going into debt is not an option. No profits and they're kaput! Get rid of that troublesome competition and things would go a lot more smoothly.

I think it's fair to ask how all this fiscal problem can possibly be. After all CMS, the agency that runs Medicare,  rigidly regulates the whole blessed thing. Each service, from heart transplant right down to drawing a tube of blood, has a fixed price and its payment is authorized only by absolute necessity. Somehow looked at this way the system doesn't seem all that efficient. I think I know the answer. Stay tuned to this station.