Health Care Inconvenient Truths

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As Congress debates the merits and methods of health-care reform—including the possibility of a single-payer government managed system—it is important to remember government’s decades-long record on social programs such as Medicare and Social Security.

Dr. John C. Goodman, “father of health savings accounts,” did just that during a February speech at Hillsdale College. “In the 19th century, by the time a child was nine years old, he was usually paying his own way in the household. In effect, children were their parents’ retirement plan,” states the March issue of Hillsdale’s Imprimis in a column adapted from Goodman’s original speech.

“But during the 20th century, families became smaller and more dispersed—thus less useful as insurance against risk. So people turned to government for help. In fact, the main reason why governments throughout the developed world have undergone such tremendous growth has been to insure middle class families against risks that they could not easily insure against on their own.”

Goodman argues that government “has performed abysmally” in providing social services by spending money it didn’t have, promising unfunded benefits, promoting waste within health care. He cited the 2008 Social Security Trustees Report as showing “a current unfunded liability in excess of $100 trillion in 2009 dollars” but didn’t mention how many years the calculation encompassed. “And while many believe that Social Security represents our greatest entitlement problem, Medicare is six times larger in terms of unfunded obligations,” stated Goodman.

The Trustees are even more explicit about Medicare’s distress in the 2008 report’s summary. “Social Security’s current annual surpluses of tax income over expenditures will begin to decline in 2011 and then turn into rapidly growing deficits as the baby boom generation retires. Medicare’s financial status is even worse,” they state in their “Message to the Public.”

The financial crisis has worsened Social Security’s funding dilemma because fewer employees are paying into the system and wages are lower. “Another measure to assess the financial condition of the program is the primary surplus, which excludes interest credited to the trust funds,” stated entry on the Congressional Budget Office (CBO) Director’s blog. In response to declining revenues, the CBO downgraded the expected short-term surpluses in Social Security.

“The projected primary surplus dips to $3 billion in 2010, recovers for the next several years, and then falls below zero beginning in 2017,” states the Director’s blog (emphasis added), “…When the primary surplus disappears, Social Security benefits exceed Social Security’s income from the public, and the operations of the Social Security system increase the federal deficit.”

But since the government has already been operating off the fund’s surplus, these deficits will harm the general budget as well. “The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations,” explained Washington Post reporter Lori Montgomery on March 31. “If it is no longer able to do so, it could be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors. And at some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.”

Add on the additional $4.8 trillion in deficits as a result of President Obama’s budget proposals, and it quickly becomes clear that the federal bank is nearly, if not already, broken.

And the costs of medical care, both private and public, keep on increasing far above inflation. The late Troy University Professor Christopher T. Warden tied inflating health care costs to the Medicare system and indirect payments. “Somebody gives you a credit card and says, ‘Okay, this is for your clothing budget. We’ll pay for it, but you’ll have to be careful with how you use it but we’ll pay for the clothing budget,” he said at the National Press Club in July 2008.

“What do you think you’re gonna buy? It isn’t going to be at Walmart, is it? It’s going to be Armani and [other designer clothing] and so forth, so I’m not paying for it. That’s the Medicare system.” Warden is the author of Accuracy in Academia’s forthcoming textbook Voodoo Anyone? How to understand economics without really trying.

In contrast, a health-care system funded by the taxpayers would provide another level of separation between consumers and the costs of medical care.

Goodman argued that the solution to America’s health-care woes is to give people more control over their own health care dollars. “Based on our experience with health savings accounts, people who are managing their own money make radically different choices,” he said. “They find ways to be far more prudent and economic in their consumption.”

In addition, “If we want to move medicine into the 21st century,” he argued, “we have to give doctors and hospitals freedom to re-price and re-package their services in ways that neither increase the cost to government nor decrease the quality of service to the patient.”

For More Reading:

New Deal on Medicare

Moon Over Medicare
Health Care Deconstructed

M & M Health Care

Bethany Stotts is a staff writer at Accuracy in Academia.