By Matt Barry
The Medicare program is expected to spend about $550 billion this year. That’s 936 times more than the $587.5 million Powerball lottery at the end of November.
By 2021, the more than $1 trillion in projected spending on Medicare would be enough to buy every person 65 and older that year, all 56 million of them, 26 shares of Google stock at their current share price of $685.
Bloomberg Government analyst Christopher Flavelle found the possible solutions to Medicare’s growth none too appetizing.
Medicare is projected to grow faster than the economy for the next 75 years. The payroll tax that for a long time has covered most of Medicare’s costs now covers just one-third.
It’s easy to identify options to close this gap without increasing the deficit. It’s harder to accept the consequences that come with those choices. Flavelle narrows the choices to four: borrowing, cutting spending elsewhere, increasing revenue, or reducing cost growth.
Every option has pluses and minuses. The government could borrow more to cover its spending, but that only adds to the deficit. Cutting spending elsewhere means the political will to cut Medicare doesn’t exist and other programs would therefore face larger reductions.
Increasing revenue by charging beneficiaries more for medical care or raising taxes is fiscally viable but politically untenable. And cutting payments to providers to reduce cost growth is feasible but risks harming access and quality of care.
With one in eight Americans eligible for Medicare, it’s a huge market for health-care businesses. Congress and the president should beware that their prescription doesn’t kill the patient or the market incentives to care for them.
Matt Barry is the Bloomberg Government health analyst team leader, with a focus on Medicare, Medicaid, public health and prevention issues. Barry has more than 20 years of health policy experience in the executive and legislative branches of the federal government, non-profits, private consulting and public affairs firms. He has worked on payment and access issues under Medicare and Medicaid, tobacco control policy, rural health care, and childhood immunization policy.