Plane Rides and Medicare
My first instinct was to jump into the conversation and mention that the government’s own report of the Social Security and Medicare Trust Fund lists the unfunded liabilities of Medicare at $88 trillion and states that the program is not sustainable. The problem is that I knew I would never get my exams done if this happened, so I was content to listen and think. Obviously, the Medicare program works for the doctor. He is able to charge the United States government for services that the patient would never buy on his own. This added demand bids up the price of the doctor’s services, and the doctor is paid regardless of how happy the patient is with the doctor’s work. But the more interesting concept is that the doctor seems to think that because someone else is paying for the services, they are free. It is as if the act of someone else paying for something has created the good or service out of thin air. What the doctor fails to see is that I am able to purchase fewer goods and services because my income is taxed away to pay for the fees the doctor charges his Medicare patient.
The Medicare system “works” in the doctor’s view because the promises made to those currently over 65 are being made by taxing the rest of us. But soon these promises will not be made. The dedicated revenue from the payroll tax assigned to Medicare is currently not enough to cover the payouts, and this situation is going to get worse. At some point the competing demands for federal revenues will overwhelm the demands of the Medicare system, and the tax burden to fund the system will become such a significant drag on the economy that the general population will demand changes. As Milton Friedman pointed out many years ago, there is no such thing as a free lunch. Unfortunately, my fellow passengers seem to think the opposite, and I fear their opinion is reflective of many in America who fail to see that resources used up in the production of medical services cannot be used to produce something else.
originally appeared on the
Hillsdale-econ.com blog, a
new forum for the expression of economic ideas by professors Charles
Steele and Gary Wolfram of Hillsdale College.
Gary Wolfram is William E. Simon Professor of Economics and Public Policy at Hillsdale College, President of Hillsdale Policy Group, a consulting firm specializing in taxation and policy analysis, and Chairman of the Michigan Alliance for Competitive Energy. He was a member and former Chairman of the Board of Trustees of Lake Superior State University, served as a member of Michigan's State Board of Education from 1993 to 1999, was Chairman of the Headlee Amendment Blue Ribbon Commission and has been a member of the Michigan Enterprise Zone Authority, the Michigan Strategic Fund Board, and the Michigan State Housing Development Authority Board. Dr. Wolfram's public policy experience includes serving as Congressman Nick Smith's Chief of Staff, Michigan’s Deputy State Treasurer for Taxation and Economic Policy under Governor John Engler, and Senior Economist to the Republican Senate in Michigan. Professor Wolfram graduated summa cum laude from the University of California at Santa Barbara. He received his Ph.D. in Economics from the University of California at Berkeley and has taught at several colleges and universities, including Mount Holyoke College, The University of Michigan, and Washington State University. He is a regular contributor to Human Events and The Detroit News. His publications include Towards a Free Society: An Introduction to Markets and the Political System, and several works on public policy issues. He was named Hillsdale College’s Professor of the Year for 2004. Michigan Runner Magazine also named him one of the top 25 runners in Michigan of the past 25 years.
Learn about Mr. Stolyarov's novel, Eden against the Colossus, here.