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Medicare Fund Future Still Grim

Margaret Dick Tocknell, for HealthLeaders Media, June 3, 2013

The report notes that as it has since 2008, the Trust Fund will continue to pay out more in hospital benefits and other expenditures than it receives in income—a trend that is expected to continue until reserves depleted. Interest earnings and asset redemptions cover the difference. In 2012, $11 billion in interest income and $24 billion in asset reserves were used to cover the shortfall.

Contributing to continuing Trust Fund woes are low birth rates, which mean smaller future workforce volumes available to support the millions of baby boomer retirees now entering the Medicare program. In 2025, a year before latest projected insolvency, Medicare is expected to have 73 million beneficiaries.

In making their annual plea for lawmakers to address the financial challenges facing Medicare "as soon as possible," the Medicare trustees, four federal officials and two public representatives, noted that for the seventh consecutive year, the Social Security Act requires that they issue a "Medicare funding warning because projected non-dedicated sources of revenues?primarily general revenues?are expected to continue to account for more than 45% of Medicare's outlays in 2013, a threshold breached for the first time in fiscal year 2010."

Whether Congress is ready to take serious steps to resolve Medicare issues remains to be seen. Medicare physician payment reform is much talked about on Capitol Hill but has so far been delayed for 10 consecutive years.

A 2011 study by the nonpartisan Kaiser Family Foundation found that raising the Medicare eligibility age from 65 to 67 in 2014 would generate about $7.6 billion in net savings to the federal government, but it would add $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree healthcare costs.

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1 comments on "Medicare Fund Future Still Grim"


B B Foonman (6/3/2013 at 4:36 PM)
The so-called "trust" funds are used as a red herring to keep people from realizing that Social Security and Medicare taxes are really just additional personal income taxes. The Medicare "trust fund" contains a "special type" of Treasury Bonds. They cannot be sold to raise the money to make future Social Security payouts. They can only be redeemed by the US Treasury but they are NOT counted as "debt held by the public" like real, marketable Treasury Bonds. The only way a government bond can be redeemed by the Treasury is by the government collecting taxes and fees, or borrowing elsewhere by issuing another bond. All government bonds are effectively a promise to tax in the future. A government bond that the government itself holds is a promise to pay itself in the future, but with what? Future taxes or borrowing. From the "CITIZEN'S GUIDE TO THE 2012 FINANCIAL REPORT": "In addition to debt held by the public, the Government reports about $4.7 trillion of debt outstanding.... It represents debt held by Government funds, including the Social Security and Medicare trust funds. ...these amounts are both liabilities of the Treasury and assets of the Government trust funds," http://www.fms.treas.gov/fr/12frusg/12guide.pdf The "trust funds" are both an asset and a liability to the government, i.e. a wash. The American people would be no worse off and no better off financially if the Social Security and Medicare "trust funds" were simply erased. But the American people would be less fooled if the "trust funds" were eliminated.