Ben Cerruti
Medicare Is a Financial Failure as Will Be ObamaCare
July 30, 2009

According to the 2008 report by the board of trustees for Medicare and Social Security, Medicare will spend more than it brings in from taxes that year (2008). The Medicare hospital insurance trust fund will become insolvent by 2019. This is not a surprise. Every program in which government has injected itself has never been able to support itself financially. Take Social Security, a Ponzi scheme look alike, it will begin to run a deficit in 11 years and is predicted to be bankrupt in 2037. Other examples are Amtrak and the Postal Service who both run continual annual deficits. It would seem that those in government would use this experience as a guide for what they consider doing in enacting legislation for other such programs. But that appears to not be the case.

The “Public Option” in the proposed health care bill is obviously another Medicare type program only expanded to cover everyone. Surely it must be acknowledged that making a program that is going bankrupt larger will only make the bankruptcy that much more severe. Of course, government has the power to borrow from the Federal Reserve that in turn owns a money printing press. Supporting a program that operates at a loss in this manner, as should be learned from the past, eventually causes inflation and impacts the ability for private enterprise to grow and prosper and provide employment for the benefit of all our people.

Barack Obama is prevaricating when he says the “Public Option” will provide competition for medical insurance providers. When a business does not have to earn a profit and has unlimited financial resources behind it, such as the US Treasury, it will obviously put its for-profit competition, with limited financial resources, out of business. Competition only occurs when the playing field is level. Presently, competition for health insurers could be increased by allowing consumers to buy this insurance across State lines. Congress could pass such a simple law in no time at all.

However, to really address health care costs, as Obama states is the reason for this bill, they are indeed going in the wrong direction in enacting laws that will raise costs. If Obama is serious about this, which I doubt, he must realize that the cause of health care is determined by the prices set by Medicare which are, in turn, passed on to insurance companies and physicians. Pure and simple this is price fixing. When the consumer knows someone else is paying most of the cost they are more likely to take the path of least resistance and take what services and products are offered with little objection. On the other hand, if they were spending their own money they would be more likely to make choices in their health care that were most beneficial in terms of health and pocket book. Such a plan has been around for years but never seriously considered although it makes economic sense. Unfortunately we don't find much of that in government.

Milton Friedman, noted Nobel Laureate in Economics, now deceased, suggested that Medical Savings Accounts could be a way to enact a less expensive and bureaucratic program and allow the participants the freedom to select their own health care givers. Providing a voucher directly to the consumer to be deposited in their tax free IRA, like a retirement account for this purpose, would allow them to do this, keeping any money not spent as savings towards their retirement. Dr. Friedman also suggested another option that would provide every family in the US with high deduction catastrophic insurance. This would also end the tax exemption of employer provided medical care and remove any restrictions that now exist that may be necessary for this to occur. The cost of health care would then be determined just like the cost of any other type of merchandise or service. Allowing the free market to determine the cost of health care would place its value where it should be and that would fulfill the objective of the reform presently being discussed.