“Medicare is strong. It’s not in danger of going bankrupt.” Lindsey Copeland, Medicare Rights Center, AARP Bulletin, April 2020
Those carefully crafted words using “bankrupt” are intended to imply there is no worry about Medicare. Bankruptcy is not the issue, it’s a red herring and Medicare is not financially strong.
The AARP story has a headline which reads: “The popular insurance program appears safe. The question is what to do with the rest of the U.S. health care system.”
If that is the case, somebody should tell the Medicare Trustees and actuaries because here is what they say. Note their use of substantial changes. If a trust funds revenues fall short of expenditures that’s not “safe.”
2020 Medicare Trustees Report
Total Medicare expenditures were $796 billion in 2019. The Board projects that expenditures will increase in future years at a faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, spending will increase from 3.7 percent in 2019 to 6.5 percent by 2094 (based on the Trustees’ intermediate set of assumptions). If the relatively low price increases for physicians and other health services under Medicare are not sustained and do not take full effect in the long range as assumed in the illustrative alternative projection, then Medicare spending would instead represent roughly 8.5 percent of GDP in 2094. Growth under either of these scenarios would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.
The Trustees project that HI tax income and other dedicated revenues will fall short of HI expenditures in all future years. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.
The Part B and Part D accounts in the SMI trust fund are expected to be adequately financed because income from premiums and general revenue are reset each year to cover expected costs. Such financing, however, would have to increase faster than the economy to cover expected expenditure growth.
The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges. The sooner solutions are enacted, the more flexible and gradual they can be. 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 and behavior. The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.