Medicare Deficits: Disaster or Opportunity?
2004 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds
March 23, 2004
Total Medicare expenditures were $280.8 billion in 2003 and are expected to increase in future years at a faster pace than either workers’ earnings or the economy overall. As a percentage of GDP, expenditures are projected to increase from 2.6 percent currently to 13.8 percent by 2078 (based on our
intermediate set of assumptions). The level of Medicare expenditures is expected to exceed that for Social Security in 2024 and, by 2078, to represent almost twice the cost of Social Security. Growth of this magnitude, if realized, would place a substantially greater strain on the nation’s workers, Medicare beneficiaries, and the Federal Budget.
The long-range financial projections for HI (Part A – Hospital Insurance) continue to show a very substantial financial imbalance. Budget. By the end of the 75-year period, scheduled taxes would be sufficient to cover only one-fourth of projected expenses. Accordingly, bringing the HI program into long-range financial balance would require very substantial increases in revenues and/or reductions in benefits.
The projections shown in this report continue to demonstrate the need for timely and effective action to address Medicare’s financial challenges- both the long-range financial imbalance facing the HI trust fund and the heightened problem of rapid growth in expenditures. We believe that solutions can and just be found to ensure the financial integrity of HI in the long term and to reduce the rate of growth in Medicare costs. Consideration of such reforms should occur in the relatively near future.
The sooner the solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time Available for affected individuals and organizations-including health care providers, beneficiaries, and taxpayers-to adjust their expectations. We believe that prompt, effective, and decisive action is necessary to address these challenges.
http://www.cms.hhs.gov/publications/trusteesreport/2004/tr.pdf
Comment: Although the specifics of this 221 page report will provoke considerable debate, the conclusion that action is necessary on Medicare is certainly warranted. But there is risk that attention will be narrowly directed to benefit reductions, tax increases, and privatization proposals involving greater beneficiary contributions.
Reform of health care funding should not be limited to the Medicare program since serious systemic flaws would not be addressed. Excess utilization is clearly linked to excess capacity in the health care delivery system. Measures such as regional planning and separate budgeting of capital improvements would slow cost escalation. But it would be impossible to control capacity for Medicare alone and leave the rest of health care delivery to the marketplace. In fact, health care costs are a problem for all of us, not just for Medicare.
We are spending 15.5% of our GDP on health care this year.That would fund comprehensive services for all of us, including more comprehensive services for Medicare beneficiaries. We do need to address the Medicare imbalance, but let’s do it by adopting a program that would provide access to affordable, comprehensive care for everyone: a single payer program of national health insurance.