Medicare's financial health

The responsible action of U.S. politicians in regards to the funding of programs like Medicare and Social Security should ideally be to fully fund. For example, under the leadership of President Bill Clinton we did not experience such partisan propaganda reports intended to shed a negative light on such programs. America did then experience sincere efforts to make these programs solvent. I am confident in my view in regards to entitlements and ask conservatives to pause for a moment for rethinking your policy; what is the value of American citizenship if being a U.S. citizen does not entitle you to benefits greater than other industrialized nations? Conservative policy, which I oppose as it relates to programs of social uplift, seeks to create a government that’s sole function is to protect. Such moves would take American society back to the dark ages. Security in Healthcare and retirement for all U.S. citizens should not be viewed as handouts or degraded by comparing them with programs such as welfare. This is the work of government. The founding fathers of the United States did not form this government solely to fund an army but far more paramount as stated first in the Constitution, to provide services promoting "the pursuit of happiness" for all American citizens. The current political approach in Washington D.C. is tantamount to a vision of government that holds power but lacks in accountability. An unacceptable approach however in my opinion.

-A.T. Brooks

The Nation; Alarm sounded on Medicare's financial health; Trustees warn that the program's mammoth hospitalization trust fund is projected to run a deficit in 2019.
Source: Los Angeles Times 04/24/2007

WASHINGTON
Medicare's trustees warned Monday that the program was in critical financial condition, setting in motion a process that could ignite a fierce debate during the 2008 presidential campaign over benefit cuts and tax increases.

The trustees projected that Medicare's hospitalization trust fund would probably slip into the red in 2019. Social Security is not expected to exhaust its reserves until 2041.

The trustees' statements amount to an annual status report on the government's two biggest benefit programs and the most important retirement safeguards for the middle class. In recent years, the trustees repeatedly raised the prospect of a financial crisis as the nation's 78 million baby boomers moved closer to retirement.

This year's formal warning triggers a legal requirement that the president and Congress work toward a solution. And that could ignite a political dust-up.
Social Security and Medicare are financed mainly by taxes evenly divided between workers and employers that amount to 15.3% of wages.

Medicare also relies heavily on the government's general fund -- part of a complex arrangement that led to Monday's warning.

Under a 2003 law, the trustees were required to issue a warning if two consecutive reports projected that Medicare would draw 45% or more of its financing from the general fund within seven years. The first such estimate came last year.

Now, as part of his next budget, President Bush must propose a way to deal with the funding imbalance. Lawmakers must immediately consider the proposal, but neither the president nor Congress is bound to pass a new law.
Bush does not have to make a proposal until next year, when he submits his 2009 budget. But he already called for automatic spending cuts if the warning was triggered, and for higher premiums for wealthy seniors in Medicare's prescription program.
Neither the House nor the Senate version of the 2008 budget contains any savings from Medicare or Social Security. Bringing the programs into balance will require political compromises most likely to involve spending cuts and tax increases.

"The next president is going to have to deal with these issues," said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates reducing the federal deficit. "It's important that presidential campaigns on both sides pay attention to these numbers and not take any options off the table."

That the first baby boomers, defined as people born between 1946 and 1964, will turn 65 in four years underscores the concerns about the programs.
"If we do not take action soon, the coming demographic bulge will compromise the programs' ability to support people who depend on them," said Treasury Secretary Henry M. Paulson Jr., one of four high-ranking government officials who serve as trustees.
Two independent experts, appointed to represent the public, round out the six trustees.
"While the [Medicare] warning is new, it simply reflects the same dire fiscal reality we've been reporting for years, and that has been exacerbated by the addition of the new prescription benefit," said John L. Palmer, an economics professor at Syracuse University and a public trustee. "If anything ... the challenge here has been understated."

Many Democrats and advocates for seniors see the Medicare warning as little more than a gimmick.
They say the same GOP-led Congress that instituted the warning requirement also created the Medicare prescription drug benefit, which increased spending and the likelihood that a warning would be triggered.

"It's kind of a crazy warning because it doesn't focus attention on what's important," said John Rother, director of policy and strategy for AARP, the seniors lobby.

Rep. Pete Stark (D-Fremont), chairman of a health subcommittee, called the warning "an arbitrary threshold designed to scare people."
Rother said the trustees' report also showed that the rate of increase in Medicare costs had eased slightly. "That's very good news," he said. "The movement is in the right direction."
In the past, other warnings have prompted bipartisan action to tackle thorny issues on program cuts and tax increases. It's unclear whether that will happen this time.

"We shouldn't be waiting for alarms to go off, but they may help spur much-needed and long-overdue action," said David M. Walker, head of the Government Accountability Office. "The real key is ... will policymakers act, or will they push the snooze button?"
Walker has been traveling around the country to call attention to the government's long-range fiscal problems.

The trustees' report included calculations to show the breadth of the financial gap in the programs.
The Social Security shortfall would require a 16% payroll tax increase or a 13% cut in benefits, or some combination.

Medicare is trickier, mostly because healthcare costs are rising faster than other economic indicators.
To bring the program's giant hospitalization trust fund into balance would require more than doubling the 2.9% Medicare payroll tax or program cuts of 51%, or some combination of the two.
Congress and Bush probably won't do either this year. More likely, they will increase Medicare spending by staving off a planned cut in doctors' fees.