Topic: Health Care

The High Cost of Obstructionism

By
Michael D. Tanner

Michael’s posts below looked at the Medicare Trustees Report. The 2006 Report issued by the Social Security Trustees isn’t any better. With another year of inaction, Social Security’s problems have grown worse. The program will begin running a deficit in just 11 years. In theory, the Social Security Trust Fund will pay benefits until 2040, a year earlier than predicted last year. That’s not much comfort to today’s 33-year-olds, who will face an automatic 26 percent cut in benefits unless the program is reformed before they retire.

But even that is misleading, because the Trust Fund doesn’t contain any actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to actually pay those IOUs.

Overall, the system’s unfunded liabilities—the amount it has promised more than it can actually pay—now totals $15.3 trillion.

That’s “trillion.” With a T.

Setting aside some technical changes in how future obligations are calculated, that’s also $550 billion worse than last year. In other words, because Congress failed to act last year, our children and grandchildren were handed a bill for another $550 billion.

How long will Congress continue to duck this issue?

Topics: 
General, Government and Politics, Health Care, Social Security

Medicare’s Trustees Pull the Trigger

By
Michael F. Cannon

Fortunately, the trustees’ report (see below) does help lay the groundwork for future Medicare reform. One of the few helpful provisions of the 2003 Medicare Modernization Act is what is known as “the trigger.” As Medicare’s trustees explain:

If in two consecutive [trustees] reports, it is determined that the difference between Medicare outlays and dedicated financing sources will reach 45 percent within the first 7 years, then a “Medicare funding warning” will be triggered… This finding would require the President to submit to Congress, within 15 days after the date of the next budget submission, proposed legislation to respond to the warning. Congress is then required to consider this legislation on an expedited basis. This new requirement will help call attention to Medicare’s impact on the Federal Budget.

As they did in 2004 and 2005, this year the trustees reported that the difference between dedicated funding and outlays will first exceed 45 percent of Medicare outlays in 2012. Since that is just six years off, the trustees pulled the trigger.

Since it is likely that the trustees will pull the trigger again next year as well, reformers need to start gearing up for that fight today. Here’s one place to start.

Topics: 
General, Health Care, Tax and Budget Policy

Hey Buddy, Can You Spare $86 Trillion?

By
Michael F. Cannon

That’s how much Congress would have to put in an interest-bearing account today to cover the gap between the Social Security and Medicare benefits it has promised, and its ability to actually keep those promises.

The trustees of the Medicare and Social Security programs released their annual reports at 3pm today.

A brief rundown:

  • The unfunded liability of the Social Security program grew by 20 percent (from $12.8 trillion to $15.3 trillion) while Congress dithered over reform proposals.
  • But the Social Security gap is still smaller than the unfunded liability of just the Medicare prescription drug program, which weighs in at a robust $16.2 trillion.
  • The total unfunded liability of Medicare topped $70 trillion (It’s actually $70.8 trillion. Round up or down to suit your taste.)
  • The trustees’ estimate of the unfunded liability of the Medicare drug program actually shrank 11 percent from their 2005 estimate of $18.2 trillion. But that reduction was more than offset by a 2 percent increase in the unfunded liability of the physician insurance part of Medicare (from $25.8 trillion to $26.2 trillion) and a 16 percent surge in the unfunded liability of the hospital part of Medicare (from $24.4 trillion to $28.4 trillion).

    • All told, Medicare’s problems are over four times the size of Social Security’s.

    Topics: 
    Health Care, Social Security, Tax and Budget Policy

    Medicare & Social Security Trustees Report to Be Released at Noon

    By
    Michael F. Cannon

    I expect to have more to say about the trustees report once I’ve had a chance to read it. My prediction is that the trustees will announce that Medicare’s unfunded liabilities have grown since last year’s estimate of $68.4 trillion.

    But no change in the trustees’ projections is likely to change the fact that Medicare is a ticking tax bomb — made worse by a GOP that keeps packing in the explosives.

    Topics: 
    General, Health Care, Social Security

    Entitlement Solution

    By
    Arnold Kling

    Do you think that the entitlement crisis is difficult to solve? Think again. I write

    The solution, as I have argued for several years, is to raise the age of government dependency for workers now in their 30’s and 40’s. This is a painless solution, because (a) it does not affect anyone who currently receives or is counting on government entitlements and (b) it does not really affect people now in their 30’s and 40’s.

    For people in their 30’s and 40’s today, the age of government dependency is only a promise. As of now, projected entitlement benefits to young workers are only promises that, under conservative assumptions, the government will be unable to meet. If the assumptions pan out, then the actual benefits that young workers receive when they finally retire probably will have to be reduced. It seems to me that young workers are no worse off if their promised benefits are reduced now (by raising the age of government dependency) than if their actual benefits are reduced when they reach their late 60’s.

    But then, hey, I’m not a politician. And politicians say that the age of government dependency is a third rail that no one can touch.

    Topics: 
    General, Health Care

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