Medicare, and the problems associated with it, has become a large part of the current debate over public option health insurance as part of the President's health care reform package. The biggest problem that is commonly pointed out is cost - as of 2009 (according to the budget submitted by the current administration), Medicare will cost $425 billion. That's a whole lot of money, especially when you consider that they project taking in only $191 billion in Medicare payroll taxes. In an ideal world, this wouldn't be a problem, since we would have the revenue from everyone's past Medicare taxes tucked away in a vault somewhere to make the payments for those who have already retired and started using Medicare - but we all know what happens to money when you just leave it lying around a politician, don't we? And so the $234 billion difference will have to come from somewhere else, probably borrowed from China.
But isn't there a better way? I think there is, although it would certainly be painful to get through Congress (but then, what isn't). Let's try a thought experiment and see where it takes us.
Being of a libertarian bent, and a reasonably intelligent person, I have always felt that I can make a better decision about how to spend my money than someone in D.C. who has never even met me. So in my thought experiment, the government is going to take the money that I pay in Medicare taxes, and actually put it away (not spend it!) until I need it. Assuming I am employed continuously from age 21 to age 65, which I have been so far, that means that I should accumulate roughly $264,000 when I retire at age 65 (assuming I retire at 65, and assuming tax rates don't change, etc - this is a rough estimate folks, work with me here).
So, the day after I retire, the government hands me a check for $264,000, for me to use for my health care now that I'm retired. At this point I have a couple of options.
#1 - I can put it in a health savings account and only withdraw what I need to cover my medical expenses. This is a viable option for those in good health who are willing to bet that they won't have any catastrophic expenses.
#2 - I can put that money in a savings account, and use it to purchase a health insurance plan of my choice (my preferred option). Assuming I find a plan that I like, and assuming it will cost roughly $1000 a month (again, rough estimate folks - it might cost more in your state, or less), that means I have enough money for roughly 22 years of coverage, possibly a little more with the interest it earns during those years. If I can shop around and find a less expensive plan that meets my needs, so much the better. And given that private insurers would no longer have to try and compete with the government, they just might create plans specifically for seniors, with lower monthly costs (although probably a higher deductible), in order to entice people to sign up.
#3 - I can have one heck of a party.
With either option #1 or #2, the net cost to the government each year? $0. Well, pretty close. You'll still need to pay someone to manage the money, write the checks, etc. But it will be a heck of a lot less than $234 billion, I can tell you that. And of course, with option #3, I'll probably drop dead of a heart attack 2/3 of the way through the party, thus saving everyone a great deal of expense on my future health care.
Now, why will this never happen? It would mean the government has to give up some control, which it is always desperate not to do. It also means that if people don't manage their money wisely, they'll run out. Sadly, too many Americans have come to see Medicare as a bottomless entitlement, kind of like Social Security, and aren't about to let Uncle Sam tell them there's a limit.
Instead, we'll get something like the President talked about the other day - cut the cost of the program by cutting payments to the health care providers. Never mind that they only pay 25-30% of the actual cost of procedures now, and the rest has to be passed on to the private insurers. After all, that will just help run private health insurance out of business even faster. (Sigh)