Crisis and the State of Medicare
The Washington Examiner's Barbara Boland reported on President Obama's weekly address this morning, noting President Obama used his weekly address t o celebrate the 50th Anniversary of Medicare and Medicaid. She specifically noted:
"According to Obama, those who say "Medicare and Medicaid are in crisis" are doing so as "a political excuse to cut their funding, privatize them, or phase them out entirely."
A video of the President's address, including a transcript, is available at RealClearPolitics. Here's the complete paragraph of what he said about Medicare and Medicaid being in crisis:
"And a great country keeps the promises it makes. Today, we’re often told that Medicare and Medicaid are in crisis. But that’s usually a political excuse to cut their funding, privatize them, or phase them out entirely -- all of which would undermine their core guarantee. The truth is, these programs aren’t in crisis. Nor have they kept us from cutting our deficits by two-thirds since I took office. What is true is that every month, another 250,000 Americans turn 65 years old, and become eligible for Medicare. And we all deserve a health care system that delivers efficient, high-quality care. So to keep these programs strong, we’ll have to make smart changes over time, just like we always have."
Let's take a look at where the truth lies. In an editorial last week, after Medicare's latest annual report was released, Investor's Business Daily (IBD) wrote:
"President Obama's top economists, Jeff Zients and Jason Furman, claim that the new Medicare Trustees Report "confirms the major progress that has been made in recent years in improving the financial position of the Medicare program."
"Medicare's Hospital Insurance Trust Fund will remain solvent until 2030, they say, which is 13 years longer than it was before ObamaCare. Plus, they say, growth in per-beneficiary spending was just 2.3% last year, "less than one-half of the 5.5 average rate from 2000 to 2010."
"But this sunny outlook doesn't stand up to even the slightest scrutiny.
"Medicare is still a fiscal time bomb. As the nearby chart shows, its hospital insurance deficits will hit $110 billion in 2031 — the first year after its trust fund runs out of money. Annual deficits will eventually top $1 trillion a year.
"Even that is a fantasy, since it assumes ObamaCare's steep Medicare provider payment cuts actually happen. Even Medicare's trustees are skeptical.
"Buried in an appendix, the report admits that "there is substantial uncertainty" regarding the likelihood that those cuts will be feasible. (link in the original)
"They are so deep, the report says, that what Medicare pays will "fall increasingly below providers' costs." By 2019, for example, as many as 15% of hospitals will have negative Medicare margins, it says. And the only way to avoid such massive losses would be for doctors and hospitals to "generate and sustain unprecedented levels of productivity gains."
Note footnote 3 on page 4 of that Trustees Report, which says in part, "At the request of the Trustees, the Office of the Actuary at CMS has prepared a set of illustrative Medicare projects under a hypothetical modification to current law."
In its conclusion, IBD's editorial said, "Medicare remains in financial jeopardy and is in need of serious reform. Any politician who pretends otherwise is doing taxpayers and retirees a huge disservice."
Along the same line, in an article posted at Economics21, Charles Blahous, recently a Social Security and Medicare public trustee and senior research fellow at George Mason University's Mercatus Center, writes that Medicare "is on an unsustainable path." Although quite detailed, Blahous provides several helpful charts. For example, one chart shows Medicare's declining worker/beneficiary ration -- currently about 3.1, and headed towards 2.3 in 2035. A significant decrease from where it stood in 2007, i.e., 3.8.
The following chart from Charles Blahous' article shows that Medicare's HI Trust Fund ratio has dropped even from 2014 to 2015:
In her reporting for the Washington Examiner, Boland provided the following fiscal data:
"Medicare and Medicaid account for over a third of all U.S. health spending, and gross spending on Medicare in 2015 is expected to total $634 billion, reported Barron's. While spending on these programs started rather modestly in 1965, they have risen from 2 percent of GDP in 1985 to almost 5 percent in 2014.
"Unfunded liabilities like Medicare, Medicaid, and Social Security eat up 47% of Federal spending currently, and are projected to grow in the future as the baby-boomer generation retires and health care costs skyrocket, according to the Cato Institute, a D.C.-based think-tank. Medicare and Medicaid's "unfunded liabilities for the next 75 years exceed $45 trillion, nearly three times the officially acknowledged national debt," Barron's reported." (link in the original)
Shannon Muchmore provides a more readable article at ModernHealthcare.com. An Associated Press report is posted at ABC News. Finally, the Wall Street Journal says the outlook (behind the WSJ's paywall) of the two entitlement programs are "better but still bleak."
Take a few minutes, and write to your member of Congress to find out what they are doing to make Social Security and Medicare sustainable. We've provided contact information for members of Congress when we growled on July 24, 2015 and in our June 16, 2015 Growls.
And tell them ACTA sent you.