Barron’s editorial page editor explores Medicare and Medicaid reform

Thomas Donlan of Barron’s devotes his latest editorial commentary to the issue of reforming the Great Society’s two major medical components.

Everyone, even the members of the millennial generation likely to be shortchanged, expects the programs to be around to pay benefits for another 50 years.

Probably not. Partly because of M&M’s large subsidies, health-care prices began to outpace the growth of gross domestic product about 50 years ago. If M&M go on as they are, in another 50 years they will consume most of the federal budget, or require large tax increases, or force the Treasury to borrow on a scale never seen before. The U.S. will destroy its productive economy to support aged citizens in hospitals and nursing homes.

Despite the danger of an unlimited social safety net, so obvious and so much ignored, there’s a little room for optimism. After all, Medicare and Medicaid were political impossibilities 55 years ago. Then came the election of 1964, in which prosperity, peace, and a weak Republican presidential candidate combined for a Democratic landslide. M&M were early creations of the Great Society.

Now we may be only a couple of years away from another such watershed season. Prosperity, peace, and a weak Democratic presidential candidate may come together in the election of 2016 to give Republicans the kind of national power they have not received since the election of 1928.

Even with great power, it would be hard for Republicans to repeal the Great Society’s health-care benefits without replacing them with something that appeals to the majority of citizens and to most of the interest groups that represent the health-care industry. Otherwise, the election of 2018 will be to the Republicans what 2010 was to the Democrats.

Any useful reform of M&M has to rein in fee-for-service medicine and unrestrained patient choice of providers. It also must take fraud and waste seriously. The programs are providing the money for beneficiaries to have all of the health care that doctors and hospitals and drug companies want them to have—which adds up to infinite demand.

Reformers must also understand that the main reason Americans spend 18% of GDP on health care is that providers are paid more than they are anywhere else in the world. The U.S. prices have less to do with the wealth of the nation or the volume of services and more to do with high prices for the services, since they are undisciplined by competition or consumer self-interest.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...