Today's Opinions, Tomorrow's Reality 

Mugged By Grandma

By David G. Young

Washington, DC, July 8, 2003 --  

Congress' vote to pile a massive new prescription drug benefit on top of an already insolvent Medicare program is so irresponsible as to border on evil. Widely circulated figures stating the cost over 10 years -- $400 billion1 -- are huge, yet fail to describe the far more massive costs that will appear once the bulk of the Baby Boomers retire in the decade that follows.

Medicare is a financial basket case even without these huge new expenditures. The board of trustees report for 2003 notes that the system will only be able to generate enough revenue to cover expenses for 10 years.2 And while this official balance sheet shows the program to be a rickety financial house of cards, it masks the reality that the system has already become insolvent. When crafting the Balanced Budget Act of 1997, the Clinton administration created an accounting trick allowing it to delay the insolvency of Medicare (on paper) from its then projected crisis point in 2001.3 The trick was so audacious that the Washington Post called it "a gimmick so transparent and crude as to give gimmickry a bad name."4

Today, Medicare taxes don't come close to funding the system. The shortfall is piling billions on to the national debt each year, and this debt will explode as millions and Boomers retire and strain the system. The CATO Institute estimates the total unfunded liabilities of Medicare at over $13.3 trillion 5 -- over $40,000 for every man, woman and child in the United States.

In face of this existing time bomb, it is anybody's guess where Congress will find $400 billion more to spend on the program over the next 10 years, let alone money to cover the far higher costs that the retiring Boomers will create. Without massive spending cuts, the financial burden one way or another will fall on younger taxpayers. Perhaps the greatest injustice is that the taxpayers that will pay the bill have absolutely no chance of receiving the same benefits when they retire. The financial picture is simply too bleak.

This is intergenerational thievery, plain and simple. Today's elderly Americans are financially better off than any before in history. They are receiving far more in Social Security and Medicare benefits than they ever paid into the systems. Not only are they passing the bill for their lavish spending on to their grandchildren, they are lobbying hard to take even more.

The AARP, the nation's largest lobbying organization, has spent millions pushing for the Medicare prescription drug benefit over the past decade. Backed by a membership that votes in massive numbers, politicians are pandering to their members by handing them an economic windfall, the consequences be damned.

The low voter turnout and political involvement of younger Americans, along with a news season dominated by war coverage have kept the Medicare expansion from creating much controversy. It's hard for young people to get excited about something so boring as Medicare. But money is a different matter. Over the next 10 years, the $400 billion cost will amount to $1400 out of the pocket of every American, and that's in addition to the program's regular annual costs -- $1000 per American this year.6 Demographics ensure that these costs will rise rapidly in five years when the Boomers begin to retire. President Bush's popular tax cuts are insignificant when compared to the massive tax increases required to fund this spending.

Once these facts hit taxpayers' bank accounts in the decades ahead, taxpayer opinion is bound to change. Younger Americans will politically wake up to find that they have an enormous financial headache -- a headache caused by Grandma striking them over the head and robbing them blind. It is then that elderly Americans will find their voting power insufficient to continue the thievery. At the most vulnerable time in their lives, they will feel the vengeance of a younger electorate.


1. The Washington Post, Medicare Expansion Reaches Last Hurdle, June 28, 2003

2. Centers for Medicare & Medicaid Services, Annual Report of the Boards of Trustees of the Federal Hospital Insurance Trust and Federal Supplementary Medical Insurance Trust Funds, March 17, 2003

3. The Concord Coalition, Facing Facts Alert 29: The Truth about Entitlements and The Budget, January 28, 1997

4. The Washington Post, Phony Problem, Phony Solution, January 12, 1997

5. The Cato Institute, Brand-New Entitlement, June 29, 2003

6. Centers for Medicare & Medicaid Services, Ibid. ($266 billion spent in 2002 / 280 million Americans = $980 / American)