Pethokoukis, Economics, Taxes and Spending, U.S. Economy

Despite what Vox says, this chart shows we should worry about Medicare

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Sarah Kliff of Vox reads the Medicare Trustee report and finds, “Slow health cost growth has improved Medicare’s financial outlook, extending the program’s trust fund to last until 2030.” Wow, that still doesn’t seem so far off. But Kliff says not to worry:

At its core, the Medicare Trust Fund is an accounting mechanism. It’s where payroll taxes go to help finance the Medicare program — and its where the government-run insurance program draws funds to pay seniors’ hospital bills.

The projected date of insolvency speaks to a world where Congress never changes anything about Medicare, the world of health financing stays static, and, if we keep spending payroll tax dollars at current rates, the fund can’t pay its bills.

In other words, the date of projected insolvency speaks to a world that doesn’t really exist. Health financing isn’t static, and Congress has lots of tools in its legislative tool box to ensure Medicare can continue paying seniors’ bills. That’s what they’ve done in the past and, given that seniors are pretty big fans of Medicare (as well as pretty big fans of voting), its a decently safe assumption that its what they would do in the future, too.

Whatever the new insolvency projection released today is, you can rest pretty sure that Medicare won’t pack up and stop paying bills that year — or any other time soon.

Hey, a government that has the power to (a) tax its citizens and (b) borrow in its own currency has two pretty big tools for making sure Medicare bills get paid. But does that mean Medicare isn’t in dire need of reform? As the above chart shows, we are nearing a point where Medicare spends really begins to rise as a share of GDP. And the longer the wait to implement fixes, the more sweeping those fixes will have to be. Again, look at that chart and recall what the president recently said about how high is too high for tax rates.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

2 thoughts on “Despite what Vox says, this chart shows we should worry about Medicare

  1. “The projected date of insolvency speaks to a world where Congress never changes anything about Medicare, the world of health financing stays static, and, if we keep spending payroll tax dollars at current rates, the fund can’t pay its bills.”

    Says a moutpiece for the side who is in FAVOR of “never chang(ing) anything about Medicare!” Except maybe to increase it.

    So, so, so sick of the fatuous “don’t worry, we’ll do it tomorrow” school of entitlement spending!

  2. I’ve looked up, as best I can from nearly non-existant data sources, the annual revenues and expenditures of Medicare. It has never come close to paying for itself. The idea that it has any kind of reserve in the trust fund (federal trust funds are where grand theft was perfected) is insane. Medicare is hopelessly broke and always has been. Try to look up revenues and outlays yourself. Our government is a financial fraud, the largest in history.

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