Former Senior Vice President, Economic Policy Division, and Former Chief Economist
Vice President, Health Policy, U.S. Chamber of Commerce
April 30, 2019
A popular new theme in American politics is the promise of “Medicare for All”, commonly designated as M4A. Exactly what this means precisely is still TBD as various proposals vie for the role of prototype. Placed in context, however, it’s hard to take these proposals seriously because M4A would build on a badly cracked foundation. Policymakers should fix the foundation first, before pondering additional risky reforms.
If the title is to be believed, the most bare-bones version of an M4A proposal would effectively allow every citizen to sign up for current Medicare, the financially creaky national health insurance program for America’s seniors. Some M4A proposals would instead devise a new national health insurance program, in effect a new Medicare, and force everyone including Medicare beneficiaries to join the new system.
Since M4A builds on Medicare, presumably Medicare today is in fine shape, right? No. As the Medicare Trustees’ recently released annual report reminds us, Medicare is already in deep trouble.
The Trustees provide a wealth of useful data, all dutifully caveated, but three points suffice to illustrate the plight in which past and present Congresses and administrations have left Medicare:
- In 2018, Medicare added on net nearly $300 billion to the federal budget deficit through the subsidies paid to Medicare beneficiaries, subsidies that averaged about $5,000 for Medicare’s nearly 60 million beneficiaries.
- Medicare’s Hospital Insurance Trust Fund is projected for exhaustion in 2026, just seven years hence.
- Cumulatively, Medicare faces a 75-year unfunded obligation of $42.1 trillion.
Medicare’s dire financial straits are certainly not news. Trustees, think tanks, experts, and a few brave politicians have been discussing the declining state of Medicare for years. In contrast, Congress and past administrations have ignored the problem for years. The same holds for Social Security, incidentally.
M4A proponents seek to build on Medicare even though it is already adding to the deficit, a central component is going broke, and it is massively underfunded. Apparently following the “go big or go home” mantra, various estimates indicate M4A would increase federal spending between $28 and $32 trillion over the next decade, an amount roughly equal to current total mandatory spending, or about half again as much as the federal government is expected to collect in individual income tax revenues.
The current Medicare program is in terrible shape, yet some politicians want to expand it vastly. Another old expression says, “If it ain’t broke, don’t fix it,” to which the converse would be “If it’s already broke, don’t build on it.”
M4A proponents will undoubtedly assure us their reforms would not only expand Medicare, but return it to financial health. They can’t be serious. And they can’t seriously believe American voters are going to believe a vast expansion of Medicare will be financially prudent when the politicians are already unwilling or unable to ensure current Medicare is financially sound. Policymakers should get serious about fixing Medicare. Then we can and need to have a serious debate about further health care reforms.
About the authors
Dr. J.D. Foster is the former senior vice president, Economic Policy Division, and former chief economist at the U.S. Chamber of Commerce. He explores and explains developments in the U.S. and global economies.