Bryan Lawrence, in his June 3 op-ed on Medicare (We need to learn Medicare's real cost), makes the argument that relatively few people understand just how expensive America's health insurance program for the elderly and younger disabled populations is.
He also points out that few people realize that almost half of the costs for Medicare are covered by federal income taxes paid by workers and only 38 percent by Medicare payroll taxes and interest on the Medicare trust funds. What Lawrence does not mention is that the greatest threat to the retirement security of future Americans may well be the projected increase in retiree out-of-pocket health care costs over the next several decades that will occur under current provisions in Medicare law.
According to most measures, Medicare is a public policy success story. In 1965, almost 50 percent of people aged 65 and older had no health insurance. Medicare now provides health care coverage for more than 95 percent of the population that is 65 or older. Medicare has greatly increased access to health care and helped increase longevity.
A fair-minded effort to reform Medicare would respond to the fact that Medicare beneficiaries have been experiencing a steady growth in out-of-pocket spending for health care for several years. The percentage of beneficiaries' discretionary income spent on Medicare premiums, co-payments and deductibles has increased from 10 percent in the 1980s to more than 16 percent on average today. These increasing costs have put routine medical care beyond the reach of many less affluent older people. The median income of Medicare beneficiaries is only $22,800 a year.
Current projections indicate that Medicare beneficiaries' out-of-pocket expenditures will rise from 22 percent in 2020 to between 30 percent and 40 percent in 2030. These projected increases represent a profound threat to the economic security and health status of future retirees and their families under current law — a threat that would be greatly increased by privatizing Medicare, which would not contain the costs of health care but rather shift even more of the cost burden on to those who could least afford to bear them: the elderly and disabled.
Proponents of Medicare privatization argue that putting control of Medicare resources under private plans will increase the program's efficiency and cost-effectiveness. Privatization advocates, however, ignore the fact that even as Medicare has played a critical role in increasing the longevity, quality of life and retirement security of those ages 65 and older, it is also a comparatively efficient program. When comparing rates of growth for comparable benefits, Medicare's cumulative cost rate from 1970 to now is 19 percent below that of private insurance. A December 2010 report from the American Health Insurance Plans showed that from 2000-09, prices in California increased 18 percent in the Medicaid program, 76 percent in the Medicare program and 159 percent for private insurers.
Lawrence and I agree that a more effective, as well as just, approach to containing costs would be to adopt features of health care systems that have achieved universal coverage at affordable prices in several European and Asian countries. Several other national health care systems are able to provide universal access, pay for more per capita medical services, achieve better health outcomes and consumer satisfaction at substantially lower costs than the United States.
I also agree with Lawrence that the American people deserve more complete and accurate information than the media and government currently provide — information that is critical to "an honest discussion" about the future of a program that has greatly improved the lives of our older and disabled citizens for more than 45 years.
Larry Polivka is director of the Claude Pepper Center at Florida State University.