Monday, November 15, 2010

One way or another, Medicare is going to go

It is becoming more and more apparent that the U.S. government has two choices: A) drastic cuts in health care expenditure, or B) a sovereign default, followed by drastic cuts in health care expenditure. Don't believe me? Look at this graph:

As you can see, though Social Security spending is projected to increase only slightly (as the Baby Boomers retire), but Medicare/Medicaid is projected to explode as health costs soar, sucking an ever-larger amount of our nation's GDP down the toilet of useless health "care." Other much-discussed deficit remedies - higher taxes, lower defense spending, and freezes on discretionary spending - will help only marginally and only for a few years, before the rampaging monster of health costs eats our government whole.

Now, a few points. Point the first: most of our excess health care costs, relative to other countries, go toward keeping fat elderly and middle-aged people alive (also known as "outpatient care"); the fact that our life expectancy is the same or slightly lower than that of other rich countries indicates that our nation is using high-tech expensive medical treatments to (imperfectly) cancel out poor health choices in early life. It's not working, and it is bankrupting us.

We are thus in a political bind, because seniors are disproportionately powerful in our electoral system. It was seniors, angry at Obama for cutting their Medicare to pay for expanded health coverage for the poor, who propelled the Republican Party to its historic landslide victory last week. Seniors fear and revile Obama's plan for socialized medicine for all, because it would necessitate cuts to the socialized medicine that seniors already enjoy.

Now, this is obviously unsustainable. Eventually, the big light-blue wedge on the graph above will force our government to either drastically cut Medicare or default on its sovereign debt. The latter would be an unmitigated disaster for the U.S. economy, and the austerity reforms that would be implemented in its wake would kill Medicare just as surely. However, seniors, with only a decade or two left to live, are perhaps less concerned about the nation's long-term sustainability than I am.

It would be nice to turn this point into a partisan one. I wish I could, as Paul Krugman and Kevin Drum do, simply point out that Democrats are willing to cut Medicare and Republicans are not, and wave my flag and say "Vote Democrat, and America will be saved!" But, although not yet a senior myself, I am old enough to remember 1996, when Bill Clinton pilloried Bob Dole for daring to have suggested cuts to Medicare. I am forced to conclude that, as un-serious as the Republican party is about deficit reduction in general, pandering to seniors is the game that everyone plays.

Our political economy now looks something like this: The party in power, realizing that Medicare is the Death Star, meekly and quietly suggest small and marginal cuts in the program, disguising their suggestions in a thick blanket of technocratic jargon and hiding the cuts inside much larger bills. But the loyal opposition dutifully sifts through the mountains of obfuscation, locates the Medicare cuts, and screams about it until blue in the face. The seniors, quaking in their slippers, turn out in a mighty horde to throw the incumbents out; wash, rinse, repeat, while wages stagnate, the deficit spirals upward, and American power declines.

What do we do about this sorry state of affairs? Sad and painful as it is for me to say this - because I really do have a lot of sympathy for old people - the answer has to be "age war." Unless younger and middle-aged voters unite in grim resolve to "throw Grandma from the train," she is going to leap off anyway and drag us onto the tracks with her.

There are only two ways to smash rising health costs. Either our government must socialize the entire health-care industry and implement draconian rationing ("death panels") to cut costs, or Medicare/Medicaid must be ruthlessly slashed, and as costs continue to rise, slashed again, until brutal market forces stop health providers from raising prices for services that fail to prolong our lives. And what this will mean, I am fairly sure, is a partial return to the culture of the multi-family home, as children are forced to take on some of the job of palliative care for their elders that hospitals now provide. In the long run, of course, a government-spearheaded public health campaign to reduce unhealthy lifestyles (fat, smoking, malnutrition) will help to bring down health costs, but it will not bear fruit in time to save us from fiscal disaster.

In any case, I wish there were another way, but political events have made it clear that Medicare is going to die. The only remaining question is whether it will kill our economy as it goes down.


  1. I think you too easily breeze over nationalizing the whole healthcare system and "death panels". Medicare is already a huge chunk of the market; expanding single-payer healthcare for everyone would create one massive monopsony that could control costs by simply dictating prices.

    And yes, this would somewhat curb innovation, but from where I'm sitting right now most "innovation" in health care consists of marginal upgrades to existing technology that raise the price tag exponentially. Kind of like how textbook publishers continually print newer, more expensive basic math textbooks every year, so do medical equipment manufacturers continually create "new" technology that does exactly the same thing at a huge annual markup.

    Also, we pay doctors way too much. I'd be fine paying a specialist whatever rate the market will bear if I was at all confident that there was real competition (or really any mechanism that would result in lower costs) between doctors. This is not the case, and so doctors can charge whatever they want, and we pay it. Nationalize the system!

  2. JollyGreen - Absolutely. I agree with two of your points wholeheartedly:

    1. Billions of dollars (eventually borne by taxpayers) is spent on marginal upgrades to drugs. As Noah pointed out, most of those upgrades are about adding on a year or two to fat, unhealthy old people.

    2. Doctors are overpayed. Yes and yes.

    Also, I don't think Noah fully emphasized the importance of public health programs. Changing the American health culture is the single best thing we can do to keep down long-term costs. Unfortunately, it's only progressive areas like NYC and California that are taking these steps (such as requiring chain restaurants to post calorie countrs - although I think there was something in the healthcare bill that mandates this nationally - yay!).

  3. Anonymous7:00 AM

    This is one of the best, easiest to understand explanations of current health care issue I've read. Congrats