We have lots of government debt. In fact, our nation's debt obligations are dramatically higher than currently acknowledged by our elected "public servants." It's time to put the issue squarely on the table.
While the President talks about climate change, gun control, immigration reform and other non-financial issues, the economy suffers, private sector investment lags, unemployment remains high and our nation's financial condition deteriorates.
Let's focus on Medicare to make the point that we're not even talking about solving our financial problems, let alone doing anything constructive about them.
Medicare has been in effect since the 1960s. Now ObamaCare is entering the picture. The financial condition of our nation's health care is already deplorable and about to get worse. So let's look at what almost 50 years of government run Medicare have brought to the obligations of America's future taxpayers.
Setting aside ObamaCare and Medicaid for now, and taking only Medicare costs as an example, whether the "real number" pertaining to our unfunded future health care liabilities is being understated by $34 trillion, $43 trillion, $100 trillion or even more, it's a staggering total and growing each day. If we don't start telling the truth about health care costs sometime soon, our country's financial future is indeed bleak.
Medical costs represent by far the biggest piece of the nation's unaffordable financial mess, and our out-of-control health care costs are easily seen by looking HONESTLY at the Medicare finances. 50 years of government control have resulted in a huge mess, and it's only going to get worse as ObamaCare is implemented.
Compounding the problem is the fact that the biggest and most politically powerful labor union on the face of the earth is the very exclusive union, the American Medical Association. Thus, don't look for U.S. health care costs to get under control anytime soon.
It's going to be a long term uphill struggle for We the People, but it's a fight worth having. We can't continue to wish our health care financial problems away. The tooth fairy won't come to our rescue. Neither will today's crop of politicians. We'll have to do it all by ourselves.
The best place to begin to deal with any complex problem is by facing squarely the simple reality of the situation. In other words, let's begin to get real by asking the simple question: Just how bad is it really?
Medicare by the Scary Numbers is subtitled 'White House spin pretends otherwise, but the unfunded liabilities may exceed $100 trillion:'
"Even before the latest Medicare trustees report came out at the end of May,
the White House spin masters had already crafted a story to go with it.
Medicare's finances have improved, we're being told. The trust fund will last
longer. The unfunded liability is lower. . . .
Here's the real story:
In their report, the trustees acknowledge that current law envisages dramatic
reductions in future Medicare outlays which may be "difficult to sustain." The
president's new budget also paints a rosy picture of Medicare's present and
Yet even with these unrealistic assumptions about Medicare costs, the future
looks bleak. The unfunded liability in Medicare, the trustees tell us, is $34
trillion over the next 75 years.
Looking indefinitely into the future, the unfunded liability is $43
trillion—almost three times the size of today's economy. Based on more plausible
assumptions, such as those reflected in the "alternative" scenario for Medicare
produced by the Congressional Budget Office in June 2012, the long-term
shortfall is more than $100 trillion.
Take one source of optimism that the trustees are compelled to transmit in
their latest report. Its predicted expenditures are based on the assumption
built into the law that next Jan. 1 there will be a 25% decrease in the fees
that Medicare pays doctors. That means that every doctor in America who
participates in Medicare will take a 25% pay cut. The reason has nothing to do
with ObamaCare. In the Balanced Budget Act of 1997, Congress declared that
Medicare physician fees could grow no faster than the economy as a whole. Since
then, though, Congress has postponed the cuts on 14 occasions, not allowing them
to take place. Why assume things will be different now?
A second problem does stem from ObamaCare. In order to pay for the expansion
of health insurance for the young, the new health law calls for steep cuts in
the growth of health-care spending on the elderly. Whereas Medicare spending per
person in real terms has been increasing at about the rate of growth of real GDP
per person plus two percentage points, the ObamaCare law calls for a spending
growth rate of GDP plus 0.04%. Assuming this slower growth rate will
materialize, over the next decade it produces about $716 billion in savings.
But the savings don't stop there. The health-reform law mandates slower
growth in health-care costs forever.
How is this supposed to happen? There have been a number of demonstration
projects that were supposed to find more efficient ways of delivering care. But
three separate CBO reports have found that these programs—such as the use of
electronic medical records and "coordinated care"—don't work to cut costs.
As a result, Medicare will have to resort to a fallback mechanism: more cuts
in provider fees. Were these cuts to be implemented, and if Medicare spending
grew no faster than the economy as a whole, the problem of Medicare would be
Yet studies by the Medicare actuaries in 2012 show that for this formula to
work, the suppression of provider fees would have to be draconian. Medicare fees
would fall below the reimbursement rates for Medicaid next year and fall further
and further as the years go by. By 2030, for instance, doctors treating Medicare
patients would be paid 40% of private health-insurance fees. The Medicare
reimbursement to hospitals for inpatient treatment would fall to 60% of the
From a financial point of view, senior patients will become less desirable
than welfare recipients. Medicare's Office of the Actuary is predicting that one
in seven hospitals will completely leave the Medicare system by 2020 because of
these pay cuts.
This is not a new problem. When the Affordable Care Act was passed in 2010,
Medicare's chief actuary, Rick Foster, said the cuts envisioned would damage
access to care. Harvard health economist Joe Newhouse predicted that seniors may
have to seek health care at the same places frequented by Medicaid patients
today—at community health centers and the emergency rooms of safety-net
So not much is looking up after all. If Congress caves to political pressure
and continues to restore cuts in provider fees, as it has done since 1997, the
unfunded liability in Medicare will be far greater than what the trustees are
Meanwhile, the fiscal gap separating the present value of all future
projected federal expenditures—Social Security, Medicare, Medicaid, ObamaCare,
defense, gassing up Air Force One, servicing existing debt, you name it—and all
future federal taxes and other receipts is, based on the CBO's projections, a
staggering $222 trillion.
Anyone in Washington who thinks we can keep pretending that there is no
long-term fiscal tsunami heading our way should look at that number—and examine
America's unfunded health care problem is more like $100 trillion or higher and not the acknowledged $34 trillion. And yet we're supposed to believe that things are about to get better when ObamaCare is implemented. Lies, more lies and more lies aren't going to get anything done. They're just going to make the unfunded entitlement mountain that much higher to climb for America's future taxpayers.
Yet the pols say that all we need to do is trust them and all will be well. Yes, of course, Santa will bring us all the presents we want. Everything's free.
Well, maybe the pols should start trusting us by admitting the unvarnished truth about the financial mess we're in and what choices need to be made about stopping the hole digging into the future.
Then we can get on with solving this mess. But not before truth telling becomes fashionable in politics, and that could be a very long time in coming.
That's my take.