The Medicare Monster

The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion.

This is a mere bagatelle compared with "conservative" projections for the next generation. The Congressional Budget Office estimates that Medicare will cost $223 billion by 1997. Constance Homer, deputy secretary of Health and Human Services, warns that "by the year 2003, at the current rates, we will be spending more on Medicare than we do on Social Security."

Anticipating a 3.5-percent annual inflation rate, government actuaries predicted that the cost of a day’s hospital stay by 1985 would be $155 and that the hospital insurance portion of Medicare would cost $9 billion by 1990. The actual average cost of a hospital day by 1985 was over $600; instead of $9 billion, the hospital-insurance program cost $63 billion in 1990.