Given Medicare’s 45th anniversary today, I wanted to pass along two nuggets showing how Medicare spending has exploded far beyond what Democrats originally projected the cost of the program would be back in 1965:
- At the time of its enactment in 1965, actuaries for the House Ways and Means Committee projected that in 1990, Medicare Part A would spend $9.1 billion on hospital services and related administration. In reality, spending in 1990 totaled nearly $67 billion—more than seven times the original estimates. (Sources: House Ways and Means Committee Print 51-291, Actuarial Estimates and Summary of Social Security Act Amendments of 1965, July 30, 1965, Table 11, p. 33; House Document 102-89, 1991 Annual Report of the Board of Trustees of the Federal Hospital Insurance Trust Fund, Table 6, p. 27.)
- Prior to its enactment, the Medicare Part B program for physician services was projected to be funded through a $3 monthly premium, supplemented by “federal appropriations of about $500 million a year from general tax revenues.” According to the most recent Medicare trustees report, in 2008, Medicare Part B relied upon $146.8 billion in federal general revenues—an increase of nearly 4300% in real (i.e. inflation-adjusted) spending. (Sources: John D. Morris, “Mills to Support Revised Medicare,” New York Times March 11, 1965, p. 18; 2009 Medicare Annual Trustees Report, May 12, 2009, http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf, Table III.C8, p. 102; CPI Inflation Calculator from Bureau of Labor Statistics, http://www.bls.gov/data/inflation_calculator.htm.)
It’s also worth pointing out that last month the Congressional Budget Office, in its long-term budget outlook, noted (Table 2-1, page 31 of the document) that from 1975 through 2008, excess cost growth in Medicare exceeded that of the private sector by more than half a percent annually (2.5% vs. 1.8%). This poor record of controlling costs in Medicare leads to several questions regarding the new health care law:
- Why did Democrats rely on more government price controls and regulation to control costs, steps that have long proven ineffective?
- Given the history of Medicare vastly exceeding spending projections, how much more will the federal government spend implementing the health care law than the $2.5 trillion cost currently projected as covering the first ten years of full implementation?
- And what will Democrats do when those health insurance costs explode for the federal government? Will they ration with their eyes open, as CMS Administrator Dr. Donald Berwick supports?