BLOG: The End of Medicare

It is a wonderful thing that the current (presumed) vice presidential candidate is also the author of the only federal budget plan that even tries to address our enormous federal budget deficits.  Paul Ryan's plans have generated a lot of controversy.  His selection as Mitt Romney's running mate will put our federal deficits, and any plans offered to address them center stage in the upcoming election.

This is a very good thing.

As I pointed out in , money not wealth. It is a tool to measure wealth.  Wealth is produced only  when people produce things of value. Government cannot control costs, health care, or anything else without controlling people.  Government can take from producers and distribute to those in need only so long as those producing continue to produce, and are willing to have their wealth redistributed.

In the popular view, Medicare is a medical "insurance" program, but it is not.  It is an entitlement program loosely tied to a tax on wages.  As Medicare attempts to fund without limit the needs of its beneficiaries, it drives rising costs, and repeatedly tries to squeeze health care providers in a futile effort to keep costs in check. The cost of Medicare in 2011 was $492 billion, and rising fast.  Medicare payroll taxes in 2011 were only $192 billion.

The fact is that "medicare as we know it" is already doomed.  The collision of 77 million retiring baby boomers with the doctors fleeing medicare guarantees its demise.  Medicare has been in deficit since 2008.  Its illusory "trust fund" will be spent in as little as 4 years - 2016.  Those getting Medicare benefits have always relied on young workers to pay for their benefits, but the accounting gimmicks will soon end, and the costs will explode.

I want to emphasize the obvious.  All the "insurance" in the world, and all the law, and all the "guarantees" will not provide any health care.  Health care is only provided by doctors, and nurses and hospitals and drug companies.  Right now, the costs of providing care are rising, and the rewards for providers are shrinking.  Econ 101 tells you that you will soon have fewer doctors, nurses and hospitals.

Medicare is attempting the impossible - keep costs low, while providing unlimited, quality care to a growing demographic.  It is the illusion of free care for the elderly.  It is a lie.

Medicare as we know it is already dead.  The conversation about whether and how to replace it is vital.  As Paul Ryan says, the current Medicare program is unsustainable, but we have made promises as a nation to our seniors that we should keep.

Let the conversation begin.