Another Disaster Coming Down the Pike
It’s that time again. Time to remind everyone that that there are plenty of other disasters-in-the-making coming down the pike — aside from all those poorly-managed financial institutions that are poised to go under — that will require an urgent seeing-to in the not-too-distant future. They include the nation’s taxpayer-financed social safety net for aging Americans. In “Medicare Running Out of Funds, Requiring Changes,” Bloomberg gives us the latest.
Spending on Medicare, the U.S. health-care program for the elderly, will reach a legal limit by 2014, requiring the next president to propose changes.
The report issued today is the second consecutive year that Medicare’s trustees have pulled the so-called trigger, a law mandating that the president introduce legislation the following year to protect the program’s financing.
President George W. Bush proposed in February that wealthier seniors pay higher premiums for Medicare’s prescription drug benefit to increase revenue. Bush’s plan, which Democrats in Congress dismissed as insufficient, was required by the trustees’ report of 2007. Because of the new report, Bush’s successor will have to offer proposals next year. The trustees also urged action to shore up Social Security, the government’s retirement program.
“As the baby boom generation moves into retirement, these programs face progressively larger financial challenges,” said Treasury Secretary Henry Paulson, one of the trustees, in a press conference. “The Medicare program poses a far greater financial challenge than Social Security.”
The trustees, all members of the Bush administration, offered projections for Medicare and Social Security similar to those in last year’s report. They again estimated that Medicare’s hospital fund will be insolvent by 2019, although earlier in that year than previously predicted, and that Social Security will run out of assets by 2041.
Medicare’s Share
Medicare’s share of the U.S. economy is expected to grow to 10.8 percent by 2082, the end of the 75-year projection period, from 3.2 percent in 2007, according to the report.
Medicare, started in 1965 to guarantee medical coverage to elderly and disabled patients, currently covers 44 million Americans. The program, which spent about $440 billion last year, is financed through a mix of payroll taxes, general tax revenue and beneficiary premiums.
When general tax revenue is projected to reach 45 percent of Medicare funding, the president is required under a 2003 law to propose legislative changes to reduce the share. The law was passed by Congress to keep spending on Medicare within bounds as the “baby boom” generation born from 1946 to 1964 qualifies for coverage and health-care costs grow faster than the economy.
Bush proposed in his fiscal 2009 budget holding the annual growth in Medicare spending to 5 percent, down from the projected 7.2 percent, largely by reducing payments to medical providers.
Democratic presidential candidates Hillary Clinton and Barack Obama have said they plan to hold down the rise in health-care spending through more cost-effective treatments, better preventive care and wider use of electronic records.
John McCain, the presumptive Republican nominee, has suggested similar measures, while proposing that Medicare reduce spending by paying a single fee for treatment of a disease, rather than reimbursing providers for individual procedures.