Health Costs - The Budget-Gobbling Medicare/Medicaid Monster

As President Obama presents his gargantuan $3.8 trillion budget with the record-setting $1.6 trillion deficit, remember this: Medicare and Medicaid are the biggest cost-drivers.

As Jacob Goldstein reminds us in his February 2 WSJ Health Blog, Medicare and Medicaid are gobbling up the budget, which is a big reason why Obamacare proposes to cut $500 billion out of Medicare over the next ten years.

Goldstein also reminds us Medicare spending ($489.3 billion) and Medicaid spending ($264.5 billion) are mandatory and are something President Obama cannot control – at least at the moment. Under current law, Medicare and Medicaid expenditures will rise by $58 billion in 2010, and that does not count the $25.3 billion proposed for Medicaid expansion.

Wait. There’s more. In 2009 the U.S. spent $2,472 trillion for health care, or $282 million an hour; health spending as a percent of GDP rose from 16.2% to 17.3%; and government share of health spending will pass 50% soon. Given the Medicare and Medicaid historical cost performances, small wonder critics wonder about government’s ability to control costs.

As comedian Milton Berle observed, “Where my health is concerned, money is no object.” Uncle Miltie was speaking of physical health. Our nation’s physical health is good and getting better, with rising life expectancies and lower death rates from heart attacks, stroke, and cancer.

But our financial health is something else again. The problem with government-centered care is that sooner or later you run out of other people’s money.

A humane but hard answer to bringing down costs is to make people aware of what health care costs by having them make health care choices by paying a greater share through high deductible policies with catastrophic caps.

That would help slay the cost-gobbling monster, but it would destroy the grand and irresistible illusion that free-entitlements are free.