Medicare Trustees Report
The latest report issued by the Medicare Trustees is not good.
The HI annual cost rate is projected to increase from 3.11 percent of taxable payroll in 2007 to 11.40 percent in 2082—8.02 percent of taxable payroll more than the projected income rate for 2082. Expressed in relation to the projected Gross Domestic Product (GDP), HI cost is estimated to rise from the current level of 1.5 percent of GDP to 4.8 percent in 2082.
The financial outlook for the Medicare program continues to raise serious concerns, and a “Medicare funding warning” is triggered again by the findings of this report. Total Medicare expenditures were $432 billion in 2007 and are expected to increase in future years at a faster pace than either workers’ earnings or the economy overall. As a percentage of GDP, expenditures are projected to increase from 3.2 percent in 2007 to 10.8 percent by 2082 (based on our intermediate set of assumptions). Growth of this magnitude, if realized, would substantially increase the strain on the nation’s workers, Medicare beneficiaries, and the Federal Budget.
HI tax income and other dedicated revenues are expected to fall short of HI expenditures in 2008 and all future years. The HI trust fund does not meet our short-range test of financial adequacy, and fund assets are projected to be exhausted in 2019.
So, in 11 years the Medicare Fund assets will be exhausted. And yet the solution to this problem is to expand government programs for health care and as a result increase demand for health care resources…which will some how work some sort of magic and make everything cheaper.
In the long range, projected expenditures and scheduled tax income are substantially out of balance, and the trust fund does not meet our test of long-range close actuarial balance. Currently, this imbalance is relatively small, with dedicated revenues estimated to cover 94 percent of costs in 2008, but it will grow rapidly in the absence of changes to current law: taxes would cover 78 percent of estimated costs in 2019, and only 30 percent at the end of the long-range period. Closing deficits of this magnitude will require very substantial increases in tax revenues and/or reductions in expenditures.
In other words, the party is about over and either taxes have to go up, expenditures have to be curtailed or both. The idea that we can have more health care (i.e. universal coverage at current levels of care)1 and lower costs is simply not an option. Anybody who says otherwise is either a liar or an idiot.
As noted previously, over the full 75-year period, the fund has a projected present value unfunded obligation of $12.4 trillion. This unfunded obligation indicates that if $12.4 trillion were added to the trust fund at the beginning of 2008, the program could meet the projected cost of current-law expenditures over the next 75 years.
Oh no problem there, our current GDP is….$14.185 trillion, we’ll simply move over an entire years worth of GDP to Medicare and there we go problem solved.
1I imagine some might not quite understand this point, I’m saying that sure we can have universal care, but that that care will have to decrease in quality if you are not to spend more money. You can’t get better care at a cheaper cost.