About 27% of a senior's Social Security check, on average, was used in 2011 to pay for premiums and copayments for Part B physician services and Part D prescription drugs.
By 2084, 46% of Social Security income will be consumed by Medicare parts B and D. These amounts don't include cost-sharing for Medicare Part A hospital care.
In the late 1960s, only about 6% of a senior's Social Security check was spent on premiums and copayments for Part B. Part D didn't exist then.
Nothing has stopped the cost of healthcare from swallowing older Americans' income. In fact, if Obama's proposal to reduce annual cost-of-living adjustments for Social Security takes effect, Medicare costs will consume an even larger share of shrinking Social Security checks.
Where does all this money for Medicare go? Most people think of Medicare as an entitlement for seniors. It is also big business. The healthcare industry relies on Medicare for
nearly $600 billion in annual revenue. In 1965, when Medicare was created, no healthcare companies were on the Fortune 100 list. Now there are 15.
According to the Institute of Medicine, 30% of healthcare spending is wasted and doesn't add to the health of the public. Last month, during a speech to healthcare leaders in Maine, I told the true story of a surgeon who wanted to be a good steward of resources. He asked his hospital about the cost of supplies in his operating room and found that he didn't need half of what had been purchased. About 10%, worth $70,000, had expired and had to be thrown away.
After the speech, a member of the audience described the discarding of massive amounts of unused hospital supplies that would fill a large swath of a basketball court. Later, a professor in a school of pharmacy said students are required to witness the periodic disposal of mountains of unused prescription drugs.
This type of waste occurs not just because of poor buying decisions by hospitals. The multibillion-dollar market for hospital supplies and equipment is ripe for transparency.