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Six Mistakes Paul Krugman Makes About Medicare’s Finances

August 30, 2015

By Charles Blahous

My usual custom when writing about Medicare and Social Security finances is to simply present the relevant data instead of discussing others’ commentaries about the programs. After this year’s Medicare trustees’ report was released, however, a subsequent Paul Krugman column prompted a number of questions from his readers, suggesting it would be helpful to address Dr. Krugman’s specific assertions.

The essence of Dr. Krugman’s column was to cite the latest Medicare report as evidence that “there never was an entitlements crisis.” Dr. Krugman’s view of the Medicare financing outlook differs with the trustees’ perspective as reflected in our joint message, which states, “Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation.” The difference between these two perspectives derives in part from problems of incomplete information and analysis.

Problem #1: Conflating expectations with reality. Dr. Krugman’s piece points to long-term Medicare cost projections that now look less daunting than they did in 2009, and asserts that the entitlement cost problem is therefore “disappearing.” That characterization, however, is incorrect. Comparing to prior projections is in this context a distraction, irrelevant to whether Medicare is now on a stable financial course (it is not).

Read the full article at Economics 21: Six Mistakes Paul Krugman Makes About Medicare's Finances