MEDICARE WILL BANKRUPT THE STATE GOVERNMENTS

Texas Gov. Rick Perry last week became the umpteenth -- if not the umpty-umpteenth -- state official to warn of the financial catastrophe awaiting us in the absence of conscientious attempts to overhaul federally subsidized health care. "We are experiencing a government takeover of health care," said the governor. That's no prissy, finger-wagging ideological declaration. The state-federal Medicaid program presently gobbles up a quarter of' Texas' budget. From 1994 to 2003, the state's share of Medicaid costs nearly doubled; the total state budget, by contrast, grew 65 percent. Medicaid now pays for half of all Texas births.

How sweet and compassionate, you say? That's only if we view the subsidizing of health care as the primary function of state government. "If these trends continue," said Perry, addressing the Texas Hospital Association, "and if federal leaders do not make reform of Medicaid a top priority, subsidized health care is going to one day bankrupt the states."

A troublesome law of life asserts itself: You can't spend money you haven't got. All around the country, the warning sirens have been howling. In 2003, Tennessee overran its Medicare budget by $966 million, New Jersey by $236 billion, New York by $1.7 billion, California by $723 billion. Reform proposals are sprouting this winter like golden daffodils. Out in California, Arnold Schwarzenegger talks of moving some Medicaid beneficiaries to managed care. New York Gov. George Pataki seeks $1.1 billion in Medicaid cuts. Tennessee's Democratic governor, Phil Bredesen, says 323,000 people must be excised from the rolls of TennCare, the state's extravagantly generous alternative to Medicaid. Into the program, the state presently pours fully a third of its budget.

In Florida, where Medicaid spending has grown an average 13 percent a year for the past six years, an especially dramatic reform program is in the works. At the center is customer choice. Gov. Jeb Bush would empower Medicaid clients to purchase specific services from managed-care organizations, using state-supplied premiums. Those who lead healthy lives would receive even larger grants. The Bush plan also contemplates private flexible spending accounts, where the owners could park tax-deductible money for future medical expenses. "Our proposals," Gov. Bush said, "put the focus back on the patient by encouraging strong patient-doctor relationships and allowing competition in the market to drive access and quality of care." Florida's Republican-controlled legislature can be expected to give the governor most of what he seeks. (The federal government must likewise provide some waivers.) The alternative: a Medicaid obligation projected at three-fifths of state spending in just 10 years.

The Social Security shout fest ("It's going bankrupt!" -- "No, it's not, you liar!") might have prepared us for the grueling challenge we confront with federal medical programs. The United States is beginning to pay the price, not for the 1933-41 New Deal, rather for the post-New Deal obsession with converting relatively modest measures of government-paid relief into costly programs of permanent social insurance. For nakedly political reasons (voters more handsomely reward lawmakers who give them money than they do those who withhold it), Social Security changed from a fallback, minimal-guarantee system into a full-fledged pension program, based on entitlement. Benefits, and the taxes to support them, soared higher than the Capitol dome. Came the '60s. Lyndon Johnson turned health care into a federal entitlement.

Our appetites proved in the end larger than the resources required to support them. Politicians taught us -- and, oh, what eager pupils we proved! -- to see the provision of daily needs as a basic function of government, never mind what our tougher, pricklier forebears had asserted to the contrary. The day of reckoning is at hand, and the sight isn't pretty. Who can wonder at that? Not the growing numbers who listen anxiously to political leaders telling us what we should have known all along: There ain't no such thing as a free lunch.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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