One of the unshakable myths of the punditariat is that the federal government is going bankrupt because of entitlements spending, especially spending on Medicare and Medicaid. Each day we hear the drumbeat saying that either we cut entitlements now or we are finished as a nation. This is a stampede of unreason, contradicted by the facts.
Look at the new budget released at the beginning of the week. Table S-6 on page 212 is the operative page. According to the President's budget, Medicare and Medicaid would rise slightly from 5.1 percent of GDP in 2011 to 5.5 percent of GDP in 2020. Not exactly the stuff of deficit cataclysm.
So what is the source of the hysteria? Some of it is simply propaganda, by those with the political agenda to gut the country's social safety net.
But there is something else. Confusion! The punditocracy is repeating the results of forecasts that indeed suggest calamity, but calamity in the late 21st century, not now. These long-term forecasts are arbitrary but have been repeated as an immutable fact by those who don't read the fine print. The most frequently quoted forecast is that of the Congressional Budget Office.
The CBO's long-term forecast assumes that health care costs will continue to rise steeply during the next 70 years, though at a diminishing rate. If healthcare costs continue to soar for decades to come, then yes, lo-and-behold, the government would eventually go broke. Federal spending on health care would reach around 25 percent of GNP in 2085.
Yet somehow I'm not ready to panic about the health care costs as of 2085. Mechanical extrapolations that assume that health care costs will rise much faster than GNP between 2011 and 2085 are utterly unconvincing. Why should healthcare costs continue to rise so far and fast when healthcare costs are already vastly over-priced now compared with what other countries pay for the same services? Why should we assume failure decade after decade to use the new information technologies to lower the costs of health-care delivery and administration?
In fact, the recent trends are mildly favorable. As J. D. Keinke of the American Enterprise Institute writes today in the Wall Street Journal, the idea of runaway health spending is a "myth" because "new data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s."
Public outrage and market pressures are gradually prevailing over the health-care lobby. American households will ultimately get the care they need much nearer to the lower prices that most other countries pay. Even if we don't get all the way down to the lower costs that we should have, there is no reason to assume that health care costs will continue to soar year in and year out for another seven decades.
Let's therefore fight the right-wing hysteria demanding immediate and harsh cuts in Medicaid and other health outlays. We do not need to cut off the lifeline of the poor and elderly. We simply need to keep up the pressure against the healthcare lobbies, and resist the panic of the punditariat.
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The basics of why one should be concerned are that if you looks at the historical numbers from 1960,70,80..to 2010, then as a fraction of annual spending medicare and medicaid has used 0%,5.2%,8.5%,11.6%,18.6%,22.6% of the budget. If you look at in terms of GDP, its 0%,0.9%,1.7%,2.5%,3.4%,5.3% of GDP. So the concern for the trend isn't arbitrary, its real.
In terms of concern for the government going bankrupt, in 2010 we were 14.5 trillion in debt. If we never created medicare and medicaid, we'd instead have an approximately 3 trillion dollar surplus. So irregardless of whether the programs should exist, and I think we do need medicaid and a more limited form of medicare, it shouldn't be held against people who say its bankrupting the nation because for better or worse, it is.
Articles like this are the reason sites like www.zerohedge.com and www.shadowstats.com are my go-to sites for financial information.
What makes you think they will not continue to be overpriced?
If health care costs are going down, then where will the cuts occur?
Where to start, where to start.........
$114,000 that 2011 retirees paid into Medicare won't cover $355,000 lifetime costs
Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services -- from prescriptions to hospital care -- worth $355,000, or about three times what they put in.
By comparison, Social Security taxes and expected benefits come closer to balancing out.
The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.
http://www.cleveland.com/nation/index.ssf/2010/12/114000_that_2011_retirees_paid.html
1980 budget 600b
2012 3.7 t
a 600% increase in 32 years....
as long as the government gets to make up what inflation is to adjust payments, it wont ever be broken. the entitlement culture is what is going to kill us....
Health care costs may, perhaps, be normalizing with regards to inflation to they are already at a rate that is far beyond reasonability. An increasing number of people will definitely enter the SS system in the coming years while the number of people paying into the PAY AS YOU GO system will not increase by the same proportion. SS holds a great amount of the highest yielding 30-year bonds ever issued by this country and they mature in 2012-2014. There is no revenue much less a surplus to redeem these bonds as was the "promise" made by Reagan!
Incredibly few politicians are willing to address the entitlement problem and house members in particular are in constant campaign mode and unwilling to risk angering those receiving SS benefits who are among the most consistent and highest proportion voters.
We need term limits and "death panels"!
When pharmaceuticals can have congress write laws almost overnight to protect their profits, believe me there is little we can do to stop them. Articles like this one do more harm than good because it makes people think that there is a rainbow. No! There is no rainbow. There are insurance executives and corporate executives looking to get rich.
Africa and in many parts of the world"
Get real.
The reason Ponzi schemes fail is because they reach unsustainable ratios.
Keep it I don't need the money. Right................ ?