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Jewish World Review Nov. 13, 2001 / 27 Mar-Cheshvan, 5762

Sue A. Blevins

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Consumer Reports

National Security: What's medicare got to do with it? -- As the nation prepares for a long and costly war on terrorism, Americans are faced with scrutinizing the role of government, in particular the size of the federal budget. Some are questioning whether we should be spending a greater share of our federal pie on national security and less on domestic programs. That question is crucial to Medicare, one of the largest government programs.

Medicare is the largest government health program in the United States and in the world. In 2000, the program cost more than $221 billion and covered approximately 39 million seniors and disabled people. Despite the resources that taxpayers have poured into the program since its 1965 inception, upon retirement many people will be surprised to learn that Medicare doesn't provide catastrophic coverage and it doesn't cover long-term care. These and many other important facts about Medicare are not widely known. If ever there was a time to become better informed about Medicare, it is now. Consider:

1) Existing rules force nearly all seniors to participate in Medicare-even if they can afford to pay privately. Although Americans are generally aware of the fact that they are required to pay Medicare taxes, many aren't aware of the fact that the government enrolls most seniors into the hospital portion of Medicare (Part A) when they apply for their Social Security benefits. They cannot reject participation in Medicare Part A unless they forego all of the Social Security benefits they were taxed for and promised all their working lives. Because giving up their Social Security benefits is too costly for most seniors, they don't have a choice but to participate in Medicare and abide by the more than 100,000 pages of federal rules and regulations governing it. Through these rules and regulations, Medicare--not seniors--dictates what services are covered for most seniors.

2) Medicare is consuming an ever-growing share of the federal budget. The costs and number of peopled served under Medicare are expected to skyrocket over the next 30 years as Baby Boomers hit retirement age. Annual Medicare expenditures will double over the next decade alone, climbing from $237 billion in 2001 to $491 billion in 2011. Medicare expenditures as a percentage of federal spending are expected to rise from 12 percent currently to 25 percent by mid-century. Additionally, by 2030, the number of beneficiaries is predicted to be 90 percent greater than today, but the number of workers paying Medicare taxes will be only about 15 percent greater than it is now. Therefore, future generations will assuredly have to forego a significant portion of their income to pay for Medicare Part A.

3) Medicare is not catastrophic insurance and it has not reduced seniors' out-of-pocket health expenses. Yet, in the 1960s, Medicare supporters argued the program was needed because seniors were paying too much out of pocket for health care. Today, seniors spend approximately 18 percent of their income on health care, not including spending on long-term care. That's nearly the same percentage they were paying when Medicare was enacted in 1965.

4) Medicare supporters tout increases in life expectancy over the past 30 years as evidence that government health care works. However, they rarely reveal that average life expectancy was on the rise long before Medicare was enacted. In fact average live expectancy in the United State increased from 47.3 years to 69.7 between 1900 and 1960--five years before Medicare was enacted.

5) The nation already had a safety net for seniors before Medicare was created. Nearly five years before Medicare was created, on Sept. 13, 1960, President Dwight Eisenhower signed into law the "Medical Assistance for the Aged" program, commonly known as the Kerr-Mills law. All told, 77 percent of seniors (12.4 million out of 16 million) were eligible for government assistance under the Kerr-Mills program. It was estimated that approximately one-half to one million seniors might become ill and require payments. By 1964, the Kerr-Mills program was providing coverage to 475,000 needy seniors. Even so, Congress established a mandatory Medicare program in 1965 that today forces nearly all seniors to enroll in the government-financed hospital program.

If Americans want to help policymakers make fully informed decisions about national spending priorities, they need to become better informed about the forthcoming Medicare financial crisis. Once informed, citizens will be able to push for national policies that give them the freedom to pay privately for the quality of health care they desire during retirement. At the same time, such Medicare reform proposals would help save precious tax dollars that would be better allocated to programs dealing with other more pressing national issues.

Sue A. Blevins is president of the Institute for Health Freedom and author of Medicare's Midlife Crisis, published by the Cato Institute. Comment by clicking here.


© 2001, Cato Institute