Epstein on the Future of Medicare

The Age of Administrative Excess
Richard A. Epstein
Defining Ideas
January 15, 2013

Earlier this month, the Supreme Court announced that it would not review the decision of the Court of Appeals for the District of Columbia Circuit in Hall v. Sebelius. The case was, however, of great importance to me as a lawyer who, along with Kent Masterson Brown, had asked the Court to review the case because of what it tells us about the unfortunate state of this nation’s Medicare program. The issues here go not only to its fiscal woes, but also to the sad state of the administrative law that governs the operation of the system.

Medicare: A Broken System

Hall is something of a quixotic lawsuit. Brought by a group of determined small government libertarians, the case raised the simple question of whether the plaintiffs could opt out of the Medicare system without having to forfeit all of their benefits, past and future, through the Social Security system. It should be instantly obvious that there will be no public groundswell to opt out of a system that gives program participants payments over their lifetime that far exceed their contributions to the plan. Indeed, the most recent report from the Medicare trustees detailed the program’s precarious long-term position given its use of general revenues to support its near open-ended entitlement system.

In his Amicus Brief on our behalf, Peter Ferrara of the American Civil Rights Union summarized the grim statistics by noting that Medicare started running deficits in 2008. By 2011, those deficits had reached some $27.7 billion, all of which had to be made up from general revenues. Projecting the program’s future has become more uncertain because of the passage of the Patient Protection and Affordable Care Act, whose impact cannot be accurately judged until the regulations have been finalized and the program has been in operation for at least some time. But even when one sticks with the intermediate estimate of deficits of $125 billion over the next 10 years, the situation is grim. But if those deficits run on the higher end of those estimates to over $680 billion during that period, grim does not begin to capture the result.