Get Ready for Medicare Rationing, Restrictions

Paying for medical care promises to gobble much greater shares of federal and state government budgets. Medicare will come to dominate the federal budget. But what’s the cause of the rise? Many discussions would have you believe that rising prices or high medical inflation are the cause. That would lead to a conclusion that we need programs to curtail increases in medical spending or inflation.

But that’s not the case, as this analysis makes clear. The problem is that the population is aging, and so more and more people will be eligible for Medicare in coming years. They’ll also burden Medicaid as many of them in coming decades seek to have Medicaid pay for nursing home care. That’s why your planning needs to incorporate potential Medicare restrictions. The government over time likely will add means-testing, increase deductibles and copayments, and reduce some covered items.

In some ways this is good news for those who want to put the nation on a more sustainable fiscal course — because it means the solutions are technically easier to figure out. With health care inflation, scholars have yet to find a “silver bullet” that would easily transition our inefficient health care system as a whole into either a much more efficient public-private hybrid, or even to a public system with the government obtaining more power to lower health care prices.

Instead, the solution needed is to simply lower promised benefits, increase cost-sharing, or more generally increase government revenues to pay for new beneficiary spending, or some combination. We would just need to mathematically account for the new ratio of workers to retirees we are expecting once the baby boomers leave the workforce.

Yet, in a political sense, this makes solutions harder in two ways. When dealing with health care inflation, there is a promise that we can get more bang-for-the-buck without anyone really “losing” since we can call a substantial chunk of health care spending “waste” as our high costs aren’t giving us concomitant health benefits. The ratio problem is not one that can be perpetually solved by riding the system of waste.