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Why Is Medicare So Expensive? Episode I

The 2x2 Project

If there are any truths to hang your hat on in the ongoing debate about the future of American healthcare, it’s this one: Medicare is really expensive.

At a whopping $509 Billion in total expenditures in 2010, it is a behemoth of an expense on the federal budget, accounting for 12 percent. Even after the passing of the Affordable Care Act, which is projected to cut Medicare costs overall, Medicare is projected to increase as a proportion of the federal budget in the next 10 years. It is, after Social Security, the most expensive line item in the federal budget. It is also one of the fastest growing—outpaced by nearly everything aside from Medicaid, a much smaller federal program. At this pace, Medicare is projected to be insolvent by 2029.

The program is best known as the jewel in President Lyndon B. Johnson’s “Great Society” campaign, but its origins hearken back to the aftermath of World War II, when in memoriam to the millions of lives lost and the devastation of the war, as well as the financial ruin of the preceding decade, Europe began investing in welfare services to protect its citizens. In line with these efforts, President Harry Truman proposed a national health insurance plan for the US.

Clearly, that’s not what he got. Vehemently opposed by the American Medical Association (AMA) and its conservative allies, the proposal was whittled down to a plan to insure Social Security beneficiaries.