Industries afflicted with Baumol's Disease have slower productivity growth.

How Sick is Medicare?

by Elaine Schwartz    •    May 28, 2012

Perhaps it all began when President Lyndon Johnson called Wilbur Mills, chairman of the House Ways and Means Committee. “Wilbur, I’ve just been looking through the polls here, and I’ve only got a few weaknesses, and the worst of them is that I’m not doing anything for the old folks. I need some help from you.”

The result? During 1965 Congress passes Medicare. Two years later they project the program will cost about $12 billion in 1990. The actual cost was $110 billion.

Looking at Medicare now, I discovered several ways to consider its cost realities. Through a study from the Urban Institute, we can compare a typical couple’s lifetime taxes to their probable benefits that would have started during 2010:

Taxes Benefits
Low to average wages $84,000 $351,000
Average to high wages $149,000 $351,000

 

Next, we can see where some of the money is being spent through this chart from 3 Harvard health policy researchers. Posted by journalist Sarah Kliff in Ezra Klein’s Washington Post Wonkbook, the chart displays how several medical specialties are driving Medicare cost increases.

Finally, the 2012 Medicare Trustees Report tells us that during 2024, the system will no longer be able to afford full benefit payments.

Our Bottom Line: Perhaps reigning in Medicare’s soaring costs returns us to the huge cost benefit disparity for individuals and the nation. For recipients and politicians, supporting cost cuts represents a massive sacrifice. For the entire country, though, the benefit would be considerable.

The entire Urban Institute report comparing entitlement benefits and taxes is here and you can read the Wonkbook graph and discussion here.

 

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