By Chris Campion
What an enormous favor Bernie’s doing for Americans! Why didn’t anyone think of this before? A truly brilliant analysis and solution provided by a U.S. Senator who didn’t receive his first paycheck until he was 40 years old has let slip the dogs of single-payer?
Not that this is any surprise, but Bernie has stated that he will be introducing a single-payer bill, which he describes as “Medicare for All.”
What sort of delights will U.S. citizens receive when Bernie puts us all on Medicare? Let’s take a look:
Medicare’s Hospital Insurance (HI) or “Part A” Trust Fund ran a cash flow deficit of $8.1 billion in 2014. Expenditures from the Part A trust fund exceeded annual income every year between 2008 and 2014. The Medicare Trustees estimate that the Part A trust fund will generate surpluses between 2015 and 2023 due to recently enacted legislation and an assumed continuation of the economic recovery. Specifically, the Medicare Part A trust fund income is expected to exceed expenditures by about $2 billion in 2015. This surplus continues for the next 8 years – through 2023. Deficits are projected to return in 2024 and will continue until the Part A trust fund is officially bankrupt in 2030, at which time the Medicare program will no longer be able to pay full benefits for seniors.
Medicare Part B will consume a quarter of all federal income taxes by 2089:
The Supplementary Medical Insurance (SMI) or “Part B” trust fund pays for physician care, outpatient services, and prescription drugs. According to Medicare’s actuaries, SMI spending is growing at a rapid rate. The Trustees report evaluates the long term implications of escalating SMI cost growth by comparing it to total Federal income taxes (personal and corporate) during the same fiscal year. The Trustees now predict that, if future federal taxes maintain their historical average level (relative to the national economy), then SMI general revenue financing in 2089 will represent 26 percent of total Federal income taxes.
The Independent Payment Advisory Board – an unelected board that sets target levels for spending on Medicare – will set “savings targets” annually, which means cuts to reimbursements to hospitals and providers:
The health care law created a 15-member Independent Payment Advisory Board (IPAB) charged with making recommendations to cut Medicare spending if and when the program’s spending exceeds specified economic growth targets. Since 2013, the CMS Chief Actuary has been required to calculate both the projected and target growth rates. If the Chief Actuary determines that the projected Medicare per capita growth rate exceeds the per capita target growth rate in a given implementation year, then the Chief Actuary must set a savings target for that year. For determination year 2013 through 2015, target growth rates have not been exceeded.targets” annually, which means cuts to reimbursements to hospitals and providers.
The Trustees now predict that Medicare’s per capita growth rate will exceed the per capita target growth rate in 2017 – five years earlier than projected in last year’s report. Legislation (S. 141, the “Protecting Seniors Access to Medicare Act”) has been introduced in the Senate that would repeal this unelected, unaccountable IPAB board. The House of Representatives approved a companion measure, H.R. 1190, on June 23, 2015.
Unfunded obligations are in the tens of trillions of dollars:
Medicare Part A is financed by a 2.9 percent payroll tax that is split between employers and employees. The health care law (starting in 2013) mandated an additional 0.9 percent payroll tax on wages over $200,000 for single filers and $250,000 for married filers. There is no upper limit on earnings subject to the tax. Income deposited into the Part A trust fund is credited using interest-bearing government securities. Expenditures for medical services and administrative costs are recorded against the fund. Securities represent obligations the government has issued to itself. The Medicare Trustees estimate the Medicare Part A total unfunded obligation over 75 years is $3.2 trillion. Using the Centers for Medicare and Medicaid Services (CMS) Actuary’s alternative projection, which looks at Medicare’s financial footing using more realistic assumptions, the Part A unfunded obligation over 75 years climbs to $7.9 trillion.
Unlike the Medicare Part A trust fund which has a dedicated revenue stream (the HI payroll tax), Medicare Part B and Medicare Part D (prescription drug benefit) are funded by beneficiary premiums and general revenue. As a result, the Medicare Trustees estimate that the amount of taxes collected over the next 75 years that will be spent to pay for Medicare Part B and Part D services equals $24.8 trillion.
Assuming current law remains unchanged, the Trustees project Medicare’s 75 year total spending in excess of dedicated revenues is $27.9 trillion. Again, using the CMS Actuary’s more realistic alternative scenario, that figure soars to $36.8 trillion.
All of this is just the start for “Medicare for All.” Because Medicare reimburses providers below the cost of providing that service, and there would be no more private insurance to push the costs onto (via increased rates in the private market), the inevitable result of underpaying for services is a reduction in services provided — or, as users of Great Britain’s NHS are enjoying right now — the rationing of health care.
Since Sanders currently enjoys a tasty exemption from the Obamacare mandate, through a subsidy provided to Congress and their staffs, I would also expect the senator, once full ensconced in the warm, loving embrace of Medicare For All to ditch his subsidy and wallow in the results of his legislation, like the people he’s planning to foist it upon.
But the larger question remains: If Sanders thinks Medicare For All is the solution to the nation’s health care problems, what, out of the above, makes him think he’s doing anything other than setting us on a path that a) reduces access to care, and b) increases the rate at which the federal budget implodes?
And this is his best idea of a fix? Then I’d hate to see the ideas he discarded as being unworkable. His latest is another example of what happens when politicians are put in charge of our lives, and their only accountability to the impacts they make on us is whether or not they can sell 50 percent of the voting populace on the idea that they’re giving them something they need, for free, paid for by someone else.
Chris Campion is a business analyst who worked for decades in leading organizations in Vermont. Reprinted with permission from the Ethan Allen Institute Blog.