Busting the Medicare Myths A Reality-Based Look at Medicare Finances and the Government Budget Jim Luke Professor of Economics Lansing Community College Nov. 13,

What Have You Heard?

We are constantly told that: “Entitlements like, socialsecuritymedicareandmedicaid are busting the budget.” “WE HAVE TO… …DO SOMETHING SERIOUS! …CUT BENEFITS!..PRIVATIZE! …VOUCHERS! …THROW GRANDMA FROM THE TRAIN! AND NOW!” “We are mortgaging our grandchildren’s future.”

The hype and rhetoric here.

Reality Check here.

The U.S. budget deficit is rising and out of control.

Budget deficit is shrinking.

Deficit as % of GDP is OK.

Budget deficit is shrinking, manageable, and no crisis exists.

ACA cuts Medicare to fund “Obamacare”.

ACA reduces projected increases in Medicare spending. End overpayments to Advantage cos. Reduce pymts for uninsured losses Reduce fraud Does not “fund” “Obamacare” Source: Prospect.org

Repealing ACA will increase & worsen Medicare cost problems. Source: Prospect.orgSource: Prospect.org and others

Medicare will be bankrupt and we must act NOW.

Part B (SMI) and D (Rx) are funded annually from general fund. “Bankruptcy” is a meaningless term. Can Pentagon go bankrupt?

Part A (HI) could become “insolvent” but not “bankrupt”. Part A (HI) has –trust fund –dedicated payroll tax. General fund taxes are off-limits If payroll tax is too little, then bfts reduced.

HI (Part A) Is As Healthy As Ever.

Raising the eligibility age will save Medicare.

Raising Eligibility Age is an Incredibly Bad Idea Raise age from 65 to 67: –Save $3.7b / year (Fed Gov) –Cost $11.4b / year (seniors, states, employers, and Medicaid) is-now-a-really-bad-idea/ is-now-a-really-bad-idea/ eligibility-age/ eligibility-age/

Boomers are a burden we can’t afford.

Medicare costs are growing out of control.

Growth in Medicare $/beneficiary has slowed dramatically.

Private insurance & competition is more efficient than government-run Medicare.

Private insurance is increasingly less efficient than Medicare

Medicare & Medicaid Control Prices Better Than Private

Medicare controls costs better. For common benefits, Medicare spending rose by an average of 4.3 percent each year between 1997 and 2009, while private insurance premiums grew at a rate of 6.5 percent per year.Medicare spending rose by an average of 4.3 percent each year between 1997 and 2009, while private insurance premiums grew at a rate of 6.5 percent per year Karen Ignagni, head of America’s Health Insurance Plans (AHIP), the insurance industry’s trade association, has admitted that private plans cannot bargain down provider costs and has asked Washington to intervene. Source: healthaffairs.org Source: healthaffairs.org and others

Private Health Insurance Admin Costs are 4-6x higher than Medicare

U.S. Healthcare costs are rising but at a slowing rate.

We spend more than others… US: $7,538 /person/year 2.5 x OECD average Higher prices Higher usage per person

But we get less.

U.S. has a Healthcare System problem. Medicare is part of the solution.i s will be bankrupt.