Medicare ‘As We Know It’ Dead in 2024

So this is a good news, bad news, more bad news, and really bad news situation. The good news is that the financial stability (or lack thereof) of medicare and social security haven’t changed much since last year. I’m afraid the good news stops there.

The bad news is that Medicare Part A (hospital insurance) will go belly-up in 2024. The more bad news is that Social Security won’t be able to meet its obligations beginning in 2033 (three years earlier than last year’s projections). And the really bad news? The projections make certain assumptions that not even the trustees who run Medicare and Social Security believe to be realistic.

You can read the 279-page report here (pdf). You can check out a more manageable summary of the findings here, or just check out these highlights:

Medicare

  • Medicare costs will grow substantially from approximately 3.7 percent of GDP in 2011 to 5.7 percent of GDP by 2035, and will increase gradually thereafter to about 6.7 percent of GDP by 2086.
  • The Trustees project that the HI Trust Fund will pay out more in hospital benefits and other expenditures than it receives in income in all future years, as it has since 2008.
  • The projected date of HI Trust Fund exhaustion is 2024, the same date projected in last year’s report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs.

Social Security

  • Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983
  • After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year.
  • Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

What does it all mean?

Here was the conclusion reached by the Trustees: “Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare.”

Perhaps lawmakers can stop talking about gimmicks like the Buffett Tax, and instead start addressing our country’s real fiscal problems.

Published or Updated: April 23, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. jim says:

    If they change nothing then medicare will be 87% funded in 2024. A 13% shortfall in projected revenue/liability is not exactly ‘dead’.

    I mean its not as if running a deficit is something unusual for our government. Its been doing so for almost all of the past 7 decades.

    Eventually they will need to reform medicare & social security of course.
    Our politicians will probably keep kicking the can down the road until they absolutely have to fix it. They’ve been doing so for over a decade already.

    I don’t see how the “Buffett tax” qualifies as a ‘gimmick’. Its a tax. Hows that a gimmick?

  2. Rob Berger says:

    Jim, thanks for the comment. I completely agree that Medicare will not be dead. But Medicare as we know it will be. A 13% shortfall is huge, and the law as it stands now would cut benefits, not raise taxes.

    As for the Buffett tax, I think it’s a gimmick for a lot of reasons. The primary reason is that it’s premised on the notion that the rich don’t pay their fair share. Given that the top 1% pay 20% of the income tax, that’s just not a defensible position. Second, it would raise very little money, at least when compared to our deficit and debt.

    I guess I’m just stunned that politicians would spend so much time on the idea when we have things like Medicare falling apart. If higher taxes for the “rich” were part of an overall plan to fix our fiscal crisis, I’d be more open to the idea. But the Buffett Tax is just a stand alone proposal that I think is more designed to get votes this November than it is to address the very real problems our country faces.

  3. jim says:

    The healthcare reform increased medicare tax rates for higher income earners. Its not as if the Medicare issue is totally ignored. They spent like a whole year arguing about healthcare reform and it had a lot of changes relevant to medicares future solvency.

    People can define ‘fair’ any way they want. One can argue that an 80 year old retirees on fixed incomes are not paying their ‘fair’ share since they’re in the sizable % of Americans who pay zero tax. Someone can argue that most Americans do not pay their ‘fair’ share since per capita spending is considerably higher than the median tax bill. As long as our tax system is progressive in any way you could argue its not fair to someone with higher effective tax rates. We’ve had progressive taxes for nearly 100 years and current to marginal rates are quite low versus historical rates. By that measure you could say that taxes are now ‘fairer’ than they’ve been in most of the past 100 years.

    “very little money”… My understanding is it would raise about $40B in taxes annually. Should we dismiss any change lower than $500B?? Whats the threshold between serious and ‘gimmick’ as far as dollars? Would a $40B annual spending cut be a ‘gimmick’ too? $40B is $40B. We won’t solve the budget and spending issues in one large chunk. They could abolish the entire US military and still not balance the budget. Nobodys saying one tax hike will cure the nations budget forever. And its not as if our congress spends time in proportion to the dollar values involved. The size of NPR’s budget or government funding of Planned Parenting spending are tiny in comparison yet those expenses get considerable discussion in the legislature.

  4. Janbeach says:

    Those fighter jets that McCain said were not needed..Lockeed Martin build….those billions should have gone to Social Security & Medicare. why do we rebuild foreign countries, when ourbridges & dams are falling apart. it is kickbacks between the companies involved & our gov. & foreign gov.

Speak Your Mind

*