How much does Medicare cost?

In 2010, the cost of Medicare came to about 15% of total government spending. Costs are projected to grow at 5.4% every year for the next decade. If Medicare spending keeps growing at the current rate, healthcare costs will eat up nearly a third the U.S. economy by 2035.

Why is it so expensive?

More seniors are drawing on Medicare benefits for longer periods of time. A 56-year-old couple today with average earnings, will end up paying $140,000 in Medicare taxes over their lifetimes, but can expect to receive about $430,000 in benefits.

The system itself is partly to blame since Doctors and hospitals make more money the more often they see patients, prescribe expensive drugs, and perform procedures. So they do so knowing that Medicare will pay for it. In addition, outright fraud and abuse costs Medicare $70 billion every year.

Is it possible to successfully overhaul an entire country’s health-care system?

Yes, the Swiss re-created their system as a public-private hybrid providing universal health care through a network of private insurers. The system provides high quality health care at a cost of less than 11% GDP.

How does Switzerland do it?

The country requires all its citizens to take out personal health insurance, cutting employers out of the picture. Insurers offer a range of programs, and are forbidden from excluding anyone. The government provides a health-care subsidy to help those with lower incomes buy a policy – about 40% of the population. But deductibles are far higher than in the U.S., providing a disincentive to pursuing unnecessary treatments. Medical fees are renegotiated every year between health-care providers and insurance firms, and must be approved by local governments.

“Chronic-disease management is better here,” Zurich physician Edouard Battegay told the New York Times. “If you don’t treat hypertension, you treat strokes. Not treating patients is expensive.”

Original story appeared in The Week, May 13, 2011, ‘The Problem with Medicare’.