47 Years Later, Medicare and Medicaid Are Financial Disasters

This Monday, July 30, 2012 will mark the 47th anniversary of the enactment of Medicare and Medicaid. On that day in 1965, President Lyndon Johnson journeyed to Independence, Missouri to sign the enabling legislation in the presence of former President Harry Truman. It was the dawn of “The Great Society” and the American nanny state.

Financially, it’s been downhill ever since.

Medicare was designed to provide medical services to those over the age of 65. Medicaid was designed to provide financial assistance to the poorest among us who can’t otherwise afford medical services. From the inception of these programs, fraud, abuse, and mismanagement have dominated their operation. 

With the aging of the population, prospects for the financial future of Medicare are ominous. As President Obama’s second cousin, Dr. Milton Wolf, a radiologist who adamantly opposes his cousin’s anti-free market policies, wrote in the Washington Times:

President Lyndon B. Johnson promised that Medicare would cost about $500 million a year – yes, million. He even said that if costs went higher, then he was going to look like the “worst kind of damn fool.” Just a year later, in 1966, the House Ways and Means Committee estimated that Medicare would cost about $12 billion a year by 1990. The actual 1990 cost was $107 billion – off by an order of magnitude but close enough for government work. And that’s when costs really took off. By 2008, annual costs hit $599 billion and the program for the first time went into deficit-spending mode.

For all the Democrats’ dishonesty and reckless spending, Republicans weren’t exactly blameless either. In 2003, President George W. Bush and a Republican Congress doubled down and ushered in the largest expansion in Medicare history with their senior citizen prescription drug entitlement program. They claimed the price tag would be $400 billion for the first decade but quietly adjusted that estimate upward to $534 billion just one month after passage…

Today we know that LBJ and a lot of other politicians indeed are the worst kind of damn fools. Medicare – like Social Security – is collapsing under its own weight and threatens to take America with it. The Medicare Trustees declared last month that Medicare Part A (Hospital Insurance Trust Fund) will be insolvent by 2024, a mere 13 years from now. Others estimate it will be only nine years. The entitlement program has racked up almost $25 trillion in unfunded liabilities. Others say it’s actually $38 trillion. It turns out free health care is pretty expensive.

Despite Democrats’ breathless claims that private insurance companies are the enemy, it is our federal government that is the largest denier of medical claims in the world. And that’s before the president unleashes his rationing board, the Independent Payment Advisory Board (IPAB) or so-called “death panel.” And if that wasn’t enough, the Democrats have plundered $1.9 trillion from Medicare over the next decade ($8.2 trillion over 20 years) to fund Obamacare and have all but destroyed the popular Medicare Advantage program. Make no mistake: Obamacare is killing Medicare.

The financial picture for Medicaid is even more bleak. As Breitbart’s William Bigelow pointed out yesterday, 47 years later “the 2010 Actuarial Report on the Financial Outlook for Medicaid for Obama’s Health and Human Services department admits” that Medicaid expenses will continue to spiral out of control, with no end in sight.

From program inception, the cost of Medicaid has generally increased at a significantly faster pace than the U.S. economy. In 1970, combined Federal and State expenditures for Medicaid represented 0.4 percent of gross domestic product (GDP), but this percentage grew to 0.9 percent in 1980, 1.2 percent in 1990, 2.0 percent in 2000, and 2.7 percent in 2009. As illustrated by the actuarial projections in this report, Medicaid costs will almost certainly continue to increase as a share of GDP in the future under current law.

And Obamcare, the report admits,  will make it worse:

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, will substantially reduce the number of people in the U.S. without health insurance. Much of this reduction will occur as a result of expanded eligibility criteria for Medicaid, which we estimate will increase the number of Medicaid enrollees by about 20 million in 2019. Medicaid provides a relatively low-cost way to increase the number of people with health coverage, since its payment rates for health care services and health plans are low compared to other forms of health insurance. Even so, aggregate Medicaid costs will increase significantly as a result of the Affordable Care Act, due to the very large number of additional enrollees starting in 2014.

Dr. Milton Wolf paints a clear eyed picture of how medical professionals see the future of Medicare under the Affordable Care Act:

In the few remaining years Medicare has left, dispirited doctors are already fleeing the program in droves – and medicine altogether – leaving behind helpless patients. Democrats’ only plan is to maintain the crumbling status quo: Plunder Medicare, chase more doctors away with an additional 30 percent cut in reimbursement next year, and then watch from the bleachers as Americans are turned into medical refugees desperate for any salvation.

The president’s intentions are chillingly clear: “I happen to be a proponent of a single payer universal health care program. … That’s what I’d like to see.” Obamacare is a major step in that direction. “I don’t think we’re going to be able to eliminate employer coverage immediately,” he says, but he can envision it “a decade out, or 15 years out, or 20 years out.”

There’s one way out of this mess. It’s time to return free market principles to the health care market. As Dr. Wolf points out, while the Democrats are going in the opposite direction, some Republicans are moving in the right direction.

Rep. Paul Ryan, Wisconsin Republican, has put forward the only serious proposal to date that can save Medicare by reforming it into a system that is in line with America’s values. It wrestles control away from Washington and instead entrusts states and empowers American citizens. And this is precisely why Barack Obama and the Democrats oppose it.

In this election year, it’s clear which party offers the best choice to prevent a financial debacle in our country’s health care system.

Michael Patrick Leahy is a Breitbart News contributor, Editor of Broadside Books’ Voices of the Tea Party e-book series, and author of  Covenant of Liberty: The Ideological Origins of the Tea Party Movement.