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A Sea Change for Medicare: The Debate We’ve Never Had

In what has been a great surprise, Medicare is moving—without any discussion or public fanfare—from being an “open-ended entitlement program” to a program that, under the Affordable Care Act (ACA), will be allowed to grow only slightly faster than the gross domestic product (GDP), at least on a per capita basis. In fact, my guess is that there are very few people among the American public, aside from assorted policy wonks, who realize this transformation is under way.

For years, economists and policy analysts have fretted over the lack of discipline associated with entitlement spending, particularly Medicare. For most government programs, spending in any year is limited to whatever amount the government appropriates for its use. For Medicare, the amount spent has reflected whatever number of services seniors have used multiplied by the price per unit of service used. Total Medicare spending is whatever results, and it can be higher or lower than what was expected or desired.

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