CNN’s health care analyst is now telling people that Medicare is going bankrupt. What does this mean? Medicare’s costs are projected to exceed its revenue and drain the surplus from its trust fund in a bit over a decade, but this has been true at several points in the past. Did Congress tell tens of millions of beneficiaries to get lost? No, Congress appropriated the money needed to keep the program going. Is Congress going to be likely to scrap Medicare a decade from now when beneficiaries are going to be a far larger share of the voting population than they were in the past? That doesn’t seem likely. So the idea that Medicare will actually run out of money, as Dr. Gupta’s claim that Medicare is going bankrupt would seem to imply, is just not plausible. If Dr. Gupta meant to imply that Medicare, as a government program is uniquely inefficient, then he is way off the mark. According to the Center for Medicare and Medicaid Services (Table 13) per beneficiary costs have risen in nominal dollars by 519.5 percent since 1980. By contrast, the cost per enrollee of private insurance has risen by 676.6 percent over this same period. In fact, with administrative costs that are just 2 percent of spending, Medicare is the most efficient part of the U.S. health care system (with the possible exception of the Veterans Administration health care system). Eliminating Medicare would raise health care costs, not lower them. So what does Dr. Gupta mean when he says that Medicare is going bankrupt?
--Dean Baker
