The New York Times ran a piece with a headline complaining "public misconception of government benefits makes trimming them harder." The piece goes on to explain that the cost of the Medicare benefits received by a typical beneficiary vastly exceeds the taxes they will have paid into the system using standard discount rates. The piece tells readers that most readers do not recognize this fact, so they get upset at the idea of cutting benefits.

The desire expressed in the piece to cut Medicare benefits indicates a misconception by the NYT and the experts cited on the nature of Medicare costs. The United States pays more than twice as much per person for its health care as the average for other wealthy countries. If it paid the same amount as Germany, Canada, or any other wealthy country with comparable health care outcomes, most or all of the gap between taxes and benefits would disappear. 

This enormous gap in expenditures is not associated with better care, it is the result of the fact that doctors, hospitals, medical equipment suppliers and other providers get paid far more in the United States than in other countries. In effect, the NYT and the experts cited in the piece want to see Medicare beneficiaries accept lower quality care because we pay too much to doctors and other providers.

It is likely that most people would find their policy prescription somewhat perverse. It is hard to see why Medicare beneficiaries should feel guilty because the specialists who treat them can make $500,000-$600,000 a year. The more obvious response would be to force doctors and other providers to accept compensation that is more in line with world standards. (We could also give beneficiaries the option to buy into lower cost systems in other countries and split the savings.)

Of course the route of cutting payments to providers would mean confronting powerful interest groups. Many policy experts are reluctant to pursue this path. 

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