Will Obama's Bold Vision End the Myth of Entitlement Reform?

As President Obama begins his second term, he does so with an expansive vision for America.

“America's possibilities are limitless,” he said in his inaugural address, “for we possess all the qualities that this world without boundaries demands:  youth and drive; diversity and openness; an endless capacity for risk and a gift for reinvention.   My fellow Americans, we are made for this moment, and we will seize it - so long as we seize it together.”

There are many potential roadblocks toward achieving that bold vision.  One is the myth that entitlement reform must be a part of it.

The reason that entitlement reform is at the top of some political agendas has nothing to do with the growth in entitlement programs today.

Some people with these agendas don’t like any government-run programs and won’t listen to the facts about them. 

Those who do look at the facts see the rapid growth in Medicare and Medicaid spending through 2009.  According to the Center for Medicare and Medicaid services, Medicare spending increased by an average of 10.9 percent per year between 1967 and 2009, and Medicaid spending by an average of 10.7 percent per year between 1975 and 2008.

They believe that this rate of growth is not sustainable.  But since the beginning of President Obama’s first term, we haven’t sustained a growth rate even close to this.

A report from last September and two more reports released in the last couple of weeks – one from the Department of Health and Human Services (HHS) and another from the Bureau of Labor Statistics (BLS) – show just how far the myth is from today’s reality.

The new HHS report found that per capita Medicare spending increased by just four-tenths of one percent in 2012, following increases of only 3.6 percent in 2011 and 1.8 percent in 2010.

And according to some new BLS data, the overall medical inflation rate last year – which should tell us something about Medicare and Medicaid growth in the coming year – was 3.2 percent. 

There is a much more immediate health spending problem about which policymakers should be worried – one that entitlement reform could make worse. 

High health costs may burden state and local governments.  But they burden people who rely on Medicare and Medicaid far more.

In an article entitled the High Cost of Out-of-Pocket Expenses published in September by the New York Times, Judith Graham summarized from a third recent study.  The study found that during the last five years of life:

• People on Medicare spend $38,688 on medical costs.
• People with Alzheimer’s spend $66,155. 
• The top quarter of spenders spend a whopping $101,791.

Some policymakers love talking about the unfairness of the “death tax.”  How about the unfairness of this hidden “pre-death tax” that gets bigger every time elected leaders cut entitlement spending? 

Entitlements are not the problem.  The cost of health care is.  Entitlements are – and always have been – the solution to the problem of a middle class forced into poverty by high health care costs near the end of life. 

And while entitlement reform may reduce government expenditures, it will only do so at the expense of those who need Medicare and Medicaid the most.

President Obama said it well in his address. 

“We must make the hard choices to reduce the cost of health care and the size of our deficit.  But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.  For we remember the lessons of our past, when twilight years were spent in poverty, and parents of a child with a disability had nowhere to turn.  We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few.  We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other - through Medicare, and Medicaid, and Social Security - these things do not sap our initiative; they strengthen us.  They do not make us a nation of takers; they free us to take the risks that make this country great.”

Contact Paul Gionfriddo at gionfriddopaul@gmail.com. Twitter: @pgionfriddo.  LinkedIn: www.linkedin/in/paulgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.