Will Baby Boom Doom Medicare?

Leading healthcare analyst Jeff Villwock weighs in:

Once those Boomers hit retirement age, however, they will rely on cash-strapped Medicare — rather than employer-sponsored coverage from the likes of WellPoint or UnitedHealth — to cover their hospital bills.

At one point, experts figured that Medicare would go broke after covering Baby Boomers for a single year. While current projections look more promising, they still assume that Medicare can pay for about a decade of Boomer care at best.

Villwock estimates, physicians will face a staggering 20% reduction in Medicare payments at the end of the year unless Congress takes some action. Instead of passing yet another temporary fix, he predicts, Congress will finally address the matter in a comprehensive Medicare package that solves the problem for good.

The proposed physician pay cut which is scheduled for 1 January 2010 will be the end of Medicare if it goes into effect.  It is unlikely that this will happen, but the problem is the proposed “solutions” seem to involve figuring out a way to maintain (or even expand) the current system.

There really isn’t an easy fix for this.  Tens of millions of Baby Boomers will be entering the Medicare system.  Even if some market-based solution like health savings accounts became universally accepted tomorrow, it’s too late in the game for the Boomers to benefit much from it.  If Medicare cuts payment to physicians, then physicians will stop taking Medicare.  That means more care (and much more expensive care) in emergency departments.

We can raise taxes to fund Medicare, but raising taxes diverts funds from the private markets (i.e. the tax base) resulting in a slower growing (or shrinking) economy resulting in a smaller tax base resulting is less, not more, money for Medicare.

How about asking the Medicare beneficiaries themselves to just pay for more of their health care?  If your name is usually preceded by “President,” “Senator,” or “Congressman,” I wouldn’t advise trying this during an election year.  Or maybe at all.

And all this is happening in a health care milieu where comparatively inexpensive primary care is shrinking, comparatively expensive specialty care is expanding, and doctors are ordering more expensive tests and imaging studies to shield themselves from lawsuits.

We’ve pretty much painted ourselves into a corner.  I’m still optimistic that in the long run we will return to a saner health care financing system where patients pay practitioners directly, where primary care is again the foundation of health care, and where third party payors are around to take care of comparatively rare and expensive problems like major surgery.

Unfortunately, we’ll have to get through the short term (which could be measured in decades) to get to this relatively rosy long term.

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