Medicare Ignored As Much As Social Security

While one presidential candidate wants a complete federal takeover of health care coverage, government or more accurately politicians have not learned how to manage what we have. Read the comments below from the latest Medicare Trustees Report.

Remember, these issues are within a system with plenty of co-pays, coinsurance, and deductibles and a far cry from covering every health care services as has been proposed.

imageWhen you hear the promises of new “free” stuff funded by new taxes, ask yourself where the money will come from to fix what we already have and is seriously underfunded. 


Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.


The estimated depletion date for the HI trust fund is 2030, the same as in last year’s report. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years. HI tax income in 2014 was somewhat higher than last year’s estimate, mostly due to adjustments for prior years,6 but is projected to be slightly lower through 2019; after 2019, however, projections of earnings throughout the period are higher mostly due to assumptions of slower projected growth in employer-sponsored health insurance—a factor that increases wages.

Although HI expenditures in 2014 were nearly equal to the previous estimate, projected expenditures are higher at the end of the 10-year period than shown in last year’s report, largely due to increases in provider payment update assumptions that reflect recent trends.

HI expenditures have exceeded income annually since 2008. However, the Trustees project slight surpluses in 2015 through 2023, with a return to deficits thereafter until the trust fund becomes depleted in 2030. In 2014, $8.1 billion in trust fund assets were redeemed to cover the shortfall of income relative to expenditures.

The Treasury also paid from the general fund $8.8 billion in interest to the HI trust fund in 2014. The assets were $205.4 billion at the beginning of 2014, representing about 76 percent of expenditures during the year, which is below the Trustees’ minimum recommended level of 100 percent. The HI trust fund has not met the Trustees’ formal test of short- range financial adequacy since 2003 (as discussed in section III.B). Growth in HI expenditures has averaged 2.1 percent annually over the last 5 years and is projected to average 4.8 percent over the next 5 years.

The SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies. In 2016, however, a hold-harmless provision that restricts Part B premium increases for most beneficiaries is expected to cause a substantial increase in the Part B premium rate for other beneficiaries.

Part B and Part D costs have averaged annual growth of 5.3 percent and 5.1 percent, respectively, over the last 5 years, as compared to growth of 3.8 percent for GDP. Under current law, the Trustees project an average annual Part B growth rate of 6.7 percent over the next 5 years. For Part D, the estimated average annual increase in expenditures is 10.9 percent over the next 5 years. The projected average annual rate of growth for the U.S. economy is 5.3 percent during this period, significantly slower than for Part B and Part D.


5 replies »

  1. I saw a report the the federal government just took in a record amount of money in the last 6 months. So why are we still spending 500 billion dollars more per year than the government takes in??? If the economy is doing so much better than it did in 2008 and the net worth of American’s is at an all time high, it is time to raise the revenue the government needs without deficit spending. Also, some limiting of growth in spending in all programs and budgets could help balance the shortfall.
    After all, there was no SS COLA in 1983, 2010, 2011, and 2016 and the world did not come to an end.


    • We don’t tax wealth, so far, and if the idiots in the beltway move in that direction, like a “haircut” on everyone’s bank account, you will see America finally eliminate the deficit by reducing spending. So long as it is the next generation’s money, the spending wll continue.


      • The current deficits in government spending cannot be maintained. Spending cuts and tax increases are the only thing that will fix the problem. Also, part of the reduction in the deficits was the ending of the wars in the middle east, as a retired USAF Master Sergeant, I saw them as the fools errand they turned into. The shortage is only 3% of the total U.S. economy and Congress could fix this problem now, if they wanted. As the economy grew we could even start paying down the debt or at least not add to it every year. I would even agree with a 3% VAT on new purchases, except food, if the politicians would balance the budget. But, my friends tell me I sometimes live in a dream world, where people do the right thing, not what serves their interest only.


      • I know nothing of the two recent wars, other than my two nephews, in the Navy, one stationed stateside, the other currently deployed to the middle east. I served during the Vietnam War, but, I was not face to face with the enemy. So, I know nothing on these topics.

        But, I do know about budgets and spending. And, I can confirm that until you take the power to tax future generations away, you will NEVER balance the budget, let alone start to pay down the debt.

        If people really had to fund their own way, people of my baby boom generation would have had only slightly greater rates of taxation; while the “greatest generation”, would have been drowned in red ink as they aged… while Congress and the president bought their votes with benefit improvements from Social Security and Medicare – paid by future generations (directly, or through the accumulation of debts).

        Take President Bush II. He added $10+ Trillion to long term deficit spending by signing into law the Medicare Modernization Act of 2003, the Rx bill, which had NO significant new revenue … funded kind of like “pay as you go” by future generations. Three fourths of the Rx costs comes from current wage earners/taxpayers, the other one fourth, supposedly, comes from current beneficiaries.

        But, almost no one covered under as of the date the law was enacted, will bear any part of the taxpayer burden – that was all shifted to future generations.

        It is as if Wimpy had gained authority to apply his “I will gladly pay you Tuesday for a hamburger today” process to the federal government. The states, e.g., Illinois, and territories, Puerto Rico, are supposed to balance their budgets, either annually or biannually. Yet, today, many are attempting their own version of this – but trying to transfer the cost of buying votes to bondholders (through some sort of bankruptcy) or through a federal taxpayer bailout.

        Again, if they are not stopped, they will continue.


  2. You state, in part, that we are going to have a break from running deficits: “… However, the Trustees project slight surpluses in 2015 through 2023, with a return to deficits thereafter until the trust fund becomes depleted in 2030. …”

    Yes, however, I believe that result will only occur if the IPAB takes effect and only if the IPAB and the trustees “manage” Medicare spending to hit PPACA target levels.

    I know part of the reduction in deficits was due to the Medicare Part A surcharge for higher income workers. That makes even worse the disconnect between benefits and the funding – which was a topic in a prior post.


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