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American health care: A real diagnosis - Medicare


Previously we discussed federal tax code and it's perverse effect on health insurance prices, costs and competition within the health insurance market.  Today we will discuss Medicare and the hidden devastation caused by federal intrusion. 

Medicare began in 1965 under Lyndon Johnson's Great Society.  Unfortunately nothing great came of Medicare and it has now become a festering sore in our budget.  Once hailed as a breakthrough for America's elderly providing choice and mobility at competitive prices has turned into the exact opposite, restricting choice and costing America seven times more than promised in 1965. 


Medicare is compulsory and whether you plan to utilize Medicare's services in the future, the Federal government extracts taxes out of your paycheck.  Upon turning the proper age you must enroll in Medicare, failure to do so will result in you forfeiting all Social Security benefits!  So much for choice and mobility.  Medicare acts and operates as a government monopoly and everyone can appreciate the harm a monopoly can do, in it's most purest form it is a destructive force to competition and a menace to consumers.  Medicare's greatest success was in the destruction of an entire market specifically designed to cater to retirees.  According to the CATO institute, In 1962 a majority of retirees were enjoying some kind of retiree health insurance coverage a fact now relegated to the archives of history.  Medicare imposes restrictions on the kind of coverage, what is covered, which plans one can buy and often lags behind innovations in the private insurance market.   For example it took Medicare over thirty years to implement some kind of drug coverage program!   Worse yet, Medicare punishes doctors who service patients outside their Medicare coverage creating a hostile and prison-like environment where choice is discouraged and personal responsibility abolished.


Just like in the previous example of Americans over consuming health care due to subsidies, retired citizens fall into the same trap.  After all, common sense dictates that if an individual is to purchase an item using someone else's money the waste and inefficiency will be an inevitable consequence.  Similarly there lacks any solid proof that spending frivolously on health care results in actual benefited health, there comes a point where extra spending for the sake of spending has no discernible effects on one's health.  While more money generally equals greater health, in the closed circuit of Medicare more money equals wasteful consultations, wasteful tests, wasteful hospital stays and wasteful procedures.  Dartmouth Medical School examined effects of wealthier regions Medicare spending and concluded that over twenty percent is completely wasted.  What does that mean in terms of your tax dollars?  How about 60 billion dollars in waste and counting?  What is worse than wasting over 60 billion dollars?  Quality suffers tremendously under Medicare.  While some patients will cite extreme satisfaction with Medicare, many more complain about lack of quality and studies further demonstrate that correlation between Medicare's spending and quality seem to be non-existent.  After all, when a program does not have to be responsible for failure due to being a monopoly, quality no longer remains the primary objective, but rather replaced by controlling costs a problem plaguing Medicare virtually since it's inception.


Beware of government prognostications, history has demonstrated time and time again that something as complex as price projection cannot be accurately done by the inept government officials representing us.  Medicare taxes have been raised 8 times since it's creation due to out of control costs, worse yet several years ago several projections were made.  By 2083, Medicare expenditures per GDP will increase to 11.4 percent (it is now about 3) doubling the equally broken Social Security.  As with the failure of Social Security, we are beginning to realize that the number of people paying into the program relative to the seniors dependent on the program is declining faster than we anticipated.   By 2083, we will have 2.4 workers paying in (currently 4 are paying ) and these projections are liable to change, generally not for the better.   If that is not alarming enough, according to the 2009 Medicare Trustees Report Medicare is now consuming roughly 11% percent of all tax revenues. In 2030 this number will double.  By 2080, this number will be over 40%, that is, one program will be consuming almost half of all tax revenues of this country.   If you were to consider that these taxes could be used for economic growth, the amount of damage calculated by supporting a wasteful program while depriving the economy of growth becomes incalculable.


In order to appreciate the gravity of the situation one must understand that today's reformers want to build on the failure of this system.  Liberals in Washington understand Medicare's situation, or at least we hope they do and want to compensate for these excesses by ensnaring a larger portion of the population.  This will grant them short term respite and project an illusion of solving the problem.  Politicians in Washington are counting on your ignorance and wish to sell you reform whose foundation solidly rests on a bankrupt ponzi scheme.  Unlike Social Security's tremendous failures, Medicare poses a much more dangerous problem because the cost of health coverage is growing at a much faster rate than retirement needs.  Not only does the government violate original rights enumerated by the Constitution, it has demonstrated quite simply that the job of providing health coverage is not something it can handle.  Liberals scoff at those that believe the private market can do better, yet they routinely ignore the following facts about their own programs. 1) They are constantly low on money 2) Their quality suffers compared to private providers 3) They are more expensive 4) They are more wasteful 5) They restrict choice and freedom.  The fifth point may very well be the first point, because ultimately Medicare is a single payer system currently servicing our seniors - the very same "public option" everyone dreads.  What do current reforms propose?  Cutting Medicare benefits.  What does that mean in the future?  Any government solution will inevitably entail benefit cuts and because government monopolies mercilessly destroy all private competition, we are trapped with nowhere to go.  Government will have ultimate control over our life.

The answer once again appears to be, less government - not more.

Next article: Medicaid


  • Kent McManigal- Albuquerque Libertarian Examiner 5 years ago

    The only solution: a total separation of medicine and state.

  • Arkady 5 years ago

    As a fellow libertarian, that realization is clear as day - but so many more Americans fail to recognize why we are having the problems we are having. Liberals try to sell the notion that our market is "broken", yet we know that these are just lies.