Medicare to surpass Social Security expenditures in 2028

The [Medicare Hospital Insurance Trust] fund also continues to fail our long-range test of close actuarial balance by a wide margin. The projected date of HI Trust Fund exhaustion is 2019, the same as in last year’s report, when dedicated revenues would be sufficient to pay only 78 percent of HI costs. Projected HI dedicated revenues fall short of outlays in this and all future years. ”

Who is this scare-mongering quotation from?  Rush Limbaugh?  Conservative think tanks?  Fox News?

Actually, this message is from the Social Security and Medicare Boards of Trustees 2008 Annual Report.  Currently, Medicare accounts for 3.2% of GDP.  The authors of the report project that by by 2028, Medicare expenditures will surpass Social Security expenditures.  By 2082, Medicare expenditures will account for 10.8% of GDP!

What is to be done?  We can increase taxes to levels that in the long run would cripple the economy.  We could cut the number of people receiving Medicare benefits.  For instance, we could increase the age at which people are eligible for Medicare or limit Medicare benefits to only certain groups (e.g.: the poor, those who are eligible for Social Security benefits, etc.).  The government could reduce the generosity of the plans by either shifting more costs to patients (i.e.: increasing co-pays and deductibles), or reduce the generosity of the benefit package (i.e.: rationing).  Or we could scrap Medicare all together and start over (e.g.: a voucher program, no elderly health insurance, mandatory savings for the purchase of health insurance later in life).

All of these ways to solve the Medicare crisis have pros and cons and those adversely affected by any change are likely to vehemently protest any reform.  Nevertheless, Medicare as it currently is structured is not a fiscally sustainable program.