Tom Patterson

Medicare Malcontent

Posted on January 15, 2008 | Author: Tom Patterson
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We don't like to think about it, but Medicare Part A has an unfunded liability over the next 75 years of $11.6 trillion. That means if we don't do anything, don't add new benefits, don't include new beneficiary groups, don't raise or lower any taxes, there will be an $11.6 trillion gap between the cost of hospital services we promised to people already alive and money available to pay for it.

That doesn't include Medicare payments to health-care providers (Part B) or the Medicare drug benefit (Part D). It doesn't account for Medicaid, Social Security or other entitlements. All told, we're handing off a $50 trillion to $60 trillion obligation to future generations with no means of meeting it.

Andrew J. Rettenmaier and Thomas J. Saving of the National Center for Policy Analysis recently proposed an intriguing reform that would address the spending catastrophe. They suggest allowing workers to deposit some of their Medicare taxes into a personally owned Health IRA. On retirement, the HIRA would fund an annuity to partially cover their Medicare-eligible expenses. HIRA owners could choose their insurance and cover out-of-pocket expenses. Their Medicare entitlement would be reduced accordingly. Under their plan (available at, reformed Medicare spending would be 20 percent to 35 percent less than under the current program.

Whether this is the right direction, at least it starts the discussion of Medicare's future, a national conversation we desperately need.

Tom Patterson is chairman of the Goldwater Institute, a former state legislator and emergency room physician. A longer version of this article originally appeared in the East Valley Tribune.

Learn More

East Valley Tribune: Medicare's future: Our unspoken problem

Washington Times: The Medicare fiscal time-bomb

National Center for Policy Analysis: Medicare: Past, Present and Future

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