Medicare is government-funded health care for Americans aged 65 and over and/or those who are permanently disabled. Like Social Security, it is funded by payroll tax deductions from both employers and employees, but only partially. Unlike Social Security, which has its roots in Franklin Roosevelt’s New Deal, Medicare began in 1966 as part of Lyndon Johnson’s Great Society.
Initial enrollment in Medicare was 19.1 million at an annual cost of about $3 billion. Former president Truman was the first person to enroll in the program. The House Ways and Means Committee estimated in 1967 that the new Medicare program would cost about $12 billion in 1990. Actual Medicare spending in 1990 was $110 billion. In 2012, Medicare covered 50.7 million people (42.1 million aged 65 and older and 8.5 million disabled) at a cost of $574.2 billion. Medicare is the third largest item in the federal budget.
Medicare actually consists of four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plan), and Part D (prescription-drug plan).
Part A is funded by a payroll tax “contribution” of 2.9 percent (split between employer and employee). The original rate was .7 percent on a taxable wage base of $6,600. Beginning in 1994, every dollar of an employee’s income began to be subject to Medicare tax. And beginning this year, high-income workers pay an additional 0.9 percent tax on their earnings above a threshold of $200,000 ($250,000 for married couples). Participation in Parts B, C, and D is voluntary. They are funded by a combination of income-based beneficiary premiums and taxpayer subsidies. Less than 25 percent of the Medicare prescription-drug plan is funded by premiums.
Enrollment in Medicare is open to all U.S. citizens or those who have been permanent legal residents for five continuous years and who (or whose spouses) have paid Medicare taxes for a minimum of 40 quarters (ten years). There is absolutely no relation between the Medicare taxes paid and the benefits received. Someone can pay Medicare taxes his whole working life and, if he is healthy, not receive a dime in benefits. Those who have reached age 65 and decide not to participate in the program are not entitled to get any of their “contribution” back.
According to the newly-released report, the “2013 Annual Report of The Boards of Trustees of The Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” although total Medicare expenditures in 2012 were $574.2 billion, total income was only $536.9 billion. The program has run a deficit since 2008. In 2012, the value of the program’s non-existent (except for accounting purposes) HI (part A) and SMI (parts B &D) “trust funds” fell from $324.9 billion to $287.6 billion.
The report goes on to say:
The estimated depletion date for the HI trust fund is 2026, 2 years later than was shown in last year’s report. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years.
Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current-law projections in this report.
Clearly, Medicare in its present form is unsustainable. The question, then, is what is the future of Medicare?
The American Association of Retired Persons (AARP) has examined this very question in “The Future of Medicare: 15 Proposals You Should Know About.” Because Medicare “is facing long-term financial challenges,” a number of proposals have been put forth to fix the system. The AARP’s proposals are:
•Raise the Medicare Eligibility Age
•Raise Medicare Premiums for Higher-Income Beneficiaries
•Change Medicare to a Premium Support Plan
•Require Drug Companies to Give Rebates or Discounts to Medicare
•Increase Medicare Cost-Sharing for Home Health Care, Skilled Nursing Facility Care and Laboratory Services
•Generate New Revenue by Increasing the Payroll Tax Rate
•Increase Supplemental Plan Costs and Reduce Coverage
•Raise Medicare Premiums for Everyone
•Strengthen the Independent Payment Advisory Board (IPAB)
•Redesign Medicare’s Copays and Deductibles
•Address the Sustainable Growth Rate (Physician Payment) Formula
•Increase Penalties for Health Care Fraud
•Allow Faster Market Access to Generic Versions of Biological Drugs
•Enroll All Beneficiaries Covered by Both Medicaid and Medicare Managed Care
•Prohibit Pay-for-Delay Agreements
Summaries of each proposal are then provided, “accompanied by two opinions that AARP commissioned from experts whose views typically represent different sides of the issues.” The experts are a conservative, Stuart Butler of the Heritage Foundation, and a liberal, Henry J. Aaron of the Brookings Institution. For proposals in which “the experts did not provide distinctly different positions, AARP commissioned experts from Avalere Health, a leading health care consulting firm, to provide analysis.”
Although the “experts” commissioned by the AARP may disagree on certain details of how the Medicare program should operate, there are two things they are all firmly united on: (1) That it is the proper role of government to have a Medicare system, and (2) That Medicare should be reformed, saved, or improved. Not once do these “experts” even question the constitutionality of Medicare. Not once do they even question the government making some Americans pay for the health care of other Americans.
While speaking recently at the World Health Organization, Health and Human Services Secretary Kathleen Sebelius made these remarks about health care:
Expanding access to health coverage is a responsibility belonging chiefly to national governments.
One goal that is particularly essential to health and development—and something that is a shared priority in the Americas and around the world—is universal health coverage. Advancing the health of our nations is a fundamental commitment we make to all our people. As President Obama recently reminded us, access to health care is “not some earned privilege—it is a right.” And that means we must work to ensure that everyone has access to the services they need.
In her remarks, Sebelius inadvertently highlighted the two fundamental problems with Medicare. One, it is run by the government. And two, it is based on compulsion.
First of all, medical insurance or medical care in the form of Medicare or anything else (SCHIP, Medicaid, Obamacare), is not the responsibilityof government. These are services that can and should be provided by the free market, just like dining, recreation, entertainment, and automobile repair are services provided by the market. Like all of the other welfare programs of the federal government, Medicare is an unconstitutional and illegitimate function of the federal government. It is socialistic and collectivist, it fosters dependency on the government, it shifts responsibility from the individual and his family to society and the state, it contributes to class warfare, and it crowds out real charity. It doesn’t matter if families and charities don’t pick up the slack (a very unlikely scenario) in the absence of government intervention in the market and someone goes without health insurance or health care. That doesn’t somehow magically make it the responsibility of government to provide someone with medical services. There is no right to health care that it is the duty of governments to provide or enforce.
And second, Medicare is an income-transfer program, a wealth-redistribution plan, and a social-engineering scheme. A free and peaceful society is grounded in the nonaggression principle — that it is always wrong to threaten or employ violence against someone except in defense of one’s person or property. But libertarians go a step further. They alone consistently apply this axiom to government as well. Medicare was established by government decree and has always been maintained by resource confiscation. Governments have nothing of their own to give anyone. The government cannot provide medical services for one American without first confiscating the resources of another American. Although participation in the system might be voluntary, the paying of taxes to support the system is mandatory. Refuse to pay and you face threats, fines, and imprisonment. But no American should be forced to pay for the health care of another American — not in a free society. No American has a right to the resources of another American, no matter what his income or need for medical services.
So, because the fundamental problems with Medicare have nothing to do with the fact that the program is financially unsound and unsustainable and is rife with inefficiency, waste, and fraud, all attempts to reform, save, or improve the system are illegitimate. Because Medicare is fundamentally immoral and illegitimate, the program must simply be ended.