A Politico article about Ben Carson’s plan to completely dismantle Medicare and Medicaid and replace them with savings accounts features the notable silence of all his Republican opponents, and this:
Carson’s GOP rivals are largely holding their fire so far. Trump’s campaign declined to comment, as did the campaigns of Jeb Bush, Ted Cruz, Carly Fiorina and Marco Rubio. A spokeswoman for Bobby Jindal noted the Louisiana governor’s support for reforming — but preserving — Medicare and Medicaid.
“Without change, they will go bankrupt,” said the spokeswoman, Shannon Dirmann. “Abolishing them is bad policy.”
The following needs to be repeated until we stop hearing nonsense like Ms. Dirmann’s, and until journalists cut that stuff off at the source: Medicare is only at risk of ‘going bankrupt’ because of how it’s financed. How it’s financed is not a fact of nature; it’s something we control.
To review: Medicare is divided into several parts. Part A pays for hospitalization. Part B pays for doctor visits. Part C is known as Medicare Advantage. Part D is for prescription drugs.
Now. Your paycheck contains a Medicare-tax piece. Today the rate is 1.45% for you, and 1.45% for your employer. That funds Part A. Which is to say: Part A has a dedicated funding source.
“So what about Parts B, C, and D?” you might ask. “Where do they get their money?” Their money comes out of general revenue. That is, Parts B-D are funded the same way the Department of Defense is funded. If the government spends more on jet fighters or Medicare Parts B-D in a given year than it budgeted for, then it funds the gap using debt.
Which is to say: the Department of Defense, by definition, cannot go bankrupt. Medicare Parts B-D, by definition, cannot go bankrupt.
The first thing to note, then, is that people should be a little clearer: when they say that ‘Medicare will go bankrupt’, what they mean is that Medicare Part A will go bankrupt. Medicare Parts B-D will never go bankrupt, because it is impossible for them to go bankrupt. Or rather, they will go bankrupt exactly when the rest of the U.S. government goes bankrupt. The U.S. government will go bankrupt when it no longer has access to enough money to fund continuing operations — i.e., when it can no longer tax, borrow, or inflate the currency enough to generate adequate revenue. And when that happens, we’ll have other problems on our hands.
The second thing to note is that the Department of Defense would also be teetering on the edge of bankruptcy if we funded it through a dedicated ‘DoD tax’ on your paycheck. I will never tire of comparing Federal programs to the DoD, because that department seems to be treated as though it were incomparable. (Note the pernicious habit of discussing “non-defense discretionary spending.”) We could manufacture a false DoD crisis if we stuck a ‘DoD tax’ line item on everyone’s paycheck, required the DoD to only fund itself from that line item, and set the line item to a low number. The next time we had a recession, lots of people would lose their jobs, which would lower tax revenue (because fewer jobs means less employment income), which would cause everyone to run around in a panic, wondering how in the world we’ll ever fend off DoD bankruptcy.
The Medicare ‘bankruptcy’ scare is an artificial crisis. It is simply an artifact of how we choose to count things. We could trivially end that scare tomorrow: write a bill declaring that Medicare Part A is hereafter funded the same way parts B-D have always been funded. Crisis: ended.
It’s not surprising that the GOP wants to keep us scared. It’s somewhat more surprising that someone like President Obama isn’t calmly explaining the fictional crisis to the American people. If I were in a really idealistic mood, I’d wonder why candidates don’t also repeatedly say, “It’s funny that funds are always available for war, but that paying to provide a good life for our citizens is somehow the height of fiscal irresponsibility.” But we all know why that is.