Jeffrey Sachs, the environmental economist of Columbia University, writes in Huffington Post that new figures show health care costs are coming under control. He says the calls for restructuring Medicare and Medicare are “hysteria” based on a “myth.” Sachs says:
According to the President's budget, Medicare and Medicaid would rise slightly from 5.1 percent of GDP in 2011 to 5.5 percent of GDP in 2020. Not exactly the stuff of deficit cataclysm.
So what is the source of the hysteria? Some of it is simply propaganda, by those with the political agenda to gut the country's social safety net.
He quotes a free market defender:
As J. D. Keinke of the American Enterprise Institute writes [Feb. 17] in the Wall Street Journal, the idea of runaway health spending is a "myth" because "new data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s."
Growing costs. Keinke, a former health-care executive, and Sachs are referring to a mildly hopeful trend, during which free market forces have tamped down on health care costs, slowing their growth relative to inflation. But those costs already are busting the budget, and they haven’t stopped rising. We'd have something to cheer about if the percent of GDP represented by Medicare and Medicaid were decreasing a little each year, or for maybe even one year.
Table S-6 of President Obama’s fiscal year 2012 budget shows Medicare and Medicaid will increase 25 percent as a share of the economy over the next 10 years.
If you want to see how this affects the federal budget, take a closer look at Medicare, for example: Average federal spending on Medicare is projected to be 3.2 percent of the economy over the next 10 years, but under the Obama plan, the Medicare payroll tax will average only 1.4 percent of GDP over the same decade. We’ll pay less than half the Medicare bill and borrow the rest. No wonder the deficit balloons.
(Meanwhile, Congress and the president again just approved waiving a third of the Social Security payroll tax, without spending cuts to replace that money. This guarantees that Social Security can’t even sustain itself this year, much less in 25 years. It also guarantees more debt of epic proportions, or a dollar collapse.)
Here we are in 2012: All our troops are out of Iraq and, according to Sachs, we’re seeing a break on health care costs, and yet the president proposes a budget that requires borrowing another $900 billion, more than the cost of the entire Iraq war. That’s no myth. The myth, the blind faith, is in pretending we’re out of the fiscal woods.