Medicare's Self-Inflicted Wounds

Today's New York Times story on Medicare fraud raises an interesting question: Who pays the medical bills when a government bureaucracy shoots itself in the foot?

The Times reports that a yet-to-be-released inspector general's report will say Medicare officials overstated their efforts to cut fraud, and in fact instructed their auditors to skip certain procedures that might have spotted bad claims. The report hasn't been released yet, and some of the reported findings may get pulled back. But the Times says the report found more than one-third of Medicare spending for medical equipment in 2006 was improper, This was at the same time that Medicare officials were boasting their new anti-fraud effort blocked $700 million in bad claims.

If it's true, the worst part is that Medicare is wasting a lot more than money.

Medicare is by far the most frightening element of the long-term fiscal problems facing the federal government. The combination of out-of-control health care costs and the retirement of 78 million baby boomers will push Medicare spending into the stratosphere. In fact, Medicare will need to dip into its "trust fund" to cover expenses for the first time this year, and the first baby boomers aren't even eligible yet.

Most budget experts will tell you that getting rid of waste and fraud won't be enough to cure Medicare's problems. We'll have to look at things like controlling health care costs, cutting benefits, or raising premiums – and probably some combination of all three.

But that's going to be a very tough sell to anyone who's read the Times story. When Public Agenda conducted focus groups on the nation's fiscal problems, we found people were at least willing to consider all kinds of solutions, including painful ones. But the biggest barrier was trust, in the form of a deep skepticism about the government. People care about Medicare, and they might consider making sacrifices to save it – but only if they thought the government would spend the money wisely. Why should they give the government more money if the government can't hang on to the money it's already got?

The potential cost in public trust here is going to be a lot more expensive than the cost of fraudulently-billed wheelchairs and oxygen tanks. Without trust, we can't solve Medicare or any of the other long-term fiscal problems we face. And failing to solve these problems would be very expensive indeed, for all of us.