Editorial: Trump's choice of Mick Mulvaney signals trouble for Medicare

Donald Trump campaigned on a promise to leave Medicare alone. But in choosing Rep. Mick Mulvaney of South Carolina to head the Office of Management and Budget, he is signaling a huge fight lies ahead over the future of the program.

Mulvaney, first elected in the Tea Party wave of 2010, helped found the House Freedom Caucus. The conservative Republican Study Committee wants to cut 17% from the federal budget. The Freedom Caucus complains that's not enough to lower future government deficits.

He'll be writing the president's first budget. At his confirmation hearing last week, when pressed about Trump's promise, Mulvaney replied, “I have to imagine the president knew what he was getting when he asked me to fill this role.”

Getting anywhere near that level of cuts without cutting defense spending—the president wants to increase it—will require huge cuts in Medicare and Medicaid. The new OMB chief could zero-out every discretionary federal program—The National Institutes of Health, Homeland Security, the Energy Department, the Environmental Protection Agency—and it wouldn't come close to 17%.

Last week's annual Congressional Budget Office projections for federal spending laid out the dimensions of the deficit problem. Healthcare costs remain the single largest driver of increasing government spending over the next decade.

For all the hostilities directed against the Affordable Care Act, its subsidies are close to a rounding error in the projections. They will consume less than 5% of the $2.2 trillion the U.S. will spend in 2027 on Medicare, Medicaid, the Children's Health Insurance Program and the individual exchanges under current law.

Medicaid isn't the problem, either. Its spending growth is projected to remain relatively tame. It will grow about 1.5 percentage points faster than the rest of the economy as the number of enrollees from the ACA expansion levels off at 17 million in 2027, up from 12 million now.

But Medicare is another story, largely driven by the aging of the baby boomers. We're now in year five of its entry into the golden years, traditionally defined as beginning at age 65. People born in 1946 (Bill Clinton, George W. Bush, Donald Trump, among others) have now turned 70. Enrollment, now at 57 million, will swell to about 75 million over the next decade.

By then, those earliest enrollees, at least those that survive, will be 81. Sadly, Mary Tyler Moore passed away last week at the tender age of 80 from complications from pneumonia. Can you say, “High healthcare cost years”?

The CBO projections reflect this further graying of an already gray America. In the second half of the coming decade, average growth in Medicare spending will rise twice as fast the rest of the economy in many years. That's very unlike the tame growth we've seen over the first five years of the baby boomers' retirement, when they were what you might call young old.

That's why nostrums on the “entitlement reform” wish list like extending the eligibility age to 67 or premium support make no sense. Yes, the young old are costly. That's why insurers want to charge people over 55 in ACA-compliant plans five times the price of young enrollees, not the 3-to-1 limit in the law.

But the young old are in relatively good health compared to those 75 to 85, who account for the lion's share of Medicare spending. Ending the young olds' access to Medicare does nothing more than transfer their healthcare costs back to employers—the equivalent of a huge tax increase on corporate America. Or they will wind up in other government programs, since many will not find work.

Turning the program over to private insurers with limited premium support may limit taxpayers' exposure, but it does nothing about the underlying problem driving excessive cost growth.

The CBO's projections are not destiny. Policymakers need to start working on making end-of-life care less costly, a surer path to improving Medicare's finances.