Why expand or create entitlements when Medicare and Social Security are going broke?

See Another Spending Siren for Joe Manchin. WSJ editorial.

"Progressives are still trying to coax West Virginia Sen. Joe Manchin into supporting a partisan tax-and-spending bill. How rude of the Medicare and Social Security Trustees to interrupt this serenade with a reminder last week that the entitlements are going broke.

The 2022 Medicare Trustees report’s silver lining is that the hospital insurance fund is expected to stay solvent until 2028, two years longer than projected last year. “This is encouraging news,” said Texas Democratic Rep. Lloyd Doggett. Alas, a major reason is that Covid killed many elderly with expensive-to-treat health conditions.

Payroll tax revenue that supports the hospital fund has also surged owing to a buoyant recovery and faster wage growth. This underscores how stronger economic growth can help ease the country’s entitlement burden. But the trustees still forecast that the hospital fund will run deficits of $530 billion over the next decade as spending exceeds tax receipts.

This is probably an optimistic scenario. The report notes that payments to providers are not expected to keep pace with physician costs, so Congress will probably need to increase them to ensure seniors don’t lose access to care. Congress for the past two decades has repeatedly stopped provider payment cuts from happening.

Democrats blame Big Pharma for bankrupting Medicare, but annual Part D prescription drug costs have grown on average 1% over the last five years. That’s far less than inflation, GDP and other Medicare spending. Even expensive drugs that grow spending in the short run can reduce long-term health spending.

Consider Hepatitis C treatments, which public-health scolds lambasted as too pricey when they launched nearly a decade ago. Prices have since plummeted 75% from about $100,000 per course thanks to market competition. A Department of Health and Human Services analysis estimates the treatments reduce patient health costs by about $16,000 annually and will save Medicaid $12 billion after this year.

Once the hospital trust fund runs dry, spending will have to be slashed by 10%. The Democratic solution is to let Medicare “negotiate” drug prices—their euphemism for price controls. But this will reduce the incentive to develop innovative treatments for hard-to-treat conditions like Alzheimer’s. The result may be higher Medicare spending over the long term.

The news from the trustees’ report on Social Security is little better. The program is expected to exhaust its reserves by 2035, at which point all retirees will face an automatic 20% benefit cut. The Committee for a Responsible Federal Budget notes that the benefit cuts or tax hikes needed to keep both trust funds solvent will be smaller if Congress acts sooner.

But these days entitlement reform is taboo in Washington. Even Republicans are loath to propose gradually raising the Medicare age to 67 or means-testing Social Security benefits, and progressives want to expand benefits for both programs.

Democrats are trying to sell Mr. Manchin on raising taxes to fund green energy corporate welfare and sweetened Affordable Care Act subsidies. The point for Congress is that you don’t buy a Ferrari when you can’t afford to fix your leaky roof."