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Is Medicare Innovation Creating Bankruptcy?


Post # 276, Bob McKnight's Florida Commentary


Medicare--the crown jewel of Roosevelt's New Deal is innovating itself into bankruptcy.


As I near being an Octogenarian for the first time, I watch carefully what is said in Washington about Medicare. The government estimates it will run out of money

by 2031, 8 years from now. That approaching deadline prompts me to look deeper into the issue of FDR's flagship social program from the New Deal.


A recent Op-Ed in the Wall Street Journal by Manhattan Institute Scholar Chris Pope pointed out that the cost of Medicare is expected to double within a decade, rising to $1.9 trillion by 2032. That is twice the level of spending for defense. Three-quarters of our current projected budget deficit increase is due to Medicare alone.


But there is some good news. Despite aging baby boomers (like me), Medicare trustees estimate that payroll growth and demographic changes are expected to have a positive impact on the deficit.


So, what is driving Medicare to near insolvency in less than a decade? It is the addition of new procedures and services to what is covered by Medicare. Professor Pope says the real culprit is both Congress and the Administration in that neither monitors these new drivers in terms of costs, competition, research, and alternatives. In a couple of words, what is missing is old fashion cost/benefit analysis.


The Professor said that between 1997 and 2011, 85% of all increases in Medicare per capita were from newly created procedure codes. As an example, the cost of new cardiovascular services increased by $2.3 Billion from 2000 to 2019. What member of Congress wants to propose limiting MRIs for heart attack patients, when they prolong so many lives? Lobbyists see new procedures and services within Medicare as "red meat" for Congress to amend appropriation bills--saving or prolonging lives for voters to live longer.


Professor Pope says critics object because having more oversight and due diligence by the government might stifle creativity and innovation. He says these additions could be rolled into Medical Advantage programs, as many prescriptions are today. Most Medical Advantage programs have aggressive cost/benefit analysis before approval.


Perhaps the most important statistic to show is the Medicare funding issue pulled out from under the camouflage of the Federal government. President Roosevelt created maybe the most important social service program ever. But we must understand that with brilliance comes oversight. And the rising costs of Medicare need oversight and action now.

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