Medicare and Medicaid Turn 45
The Medicare and Medicaid programs turn 45 today; benefits for these entitlement programs started on July 1, 1966. While the programs’ current structure may have been sufficient for a year when disposable diapers were invented and Star Trek first appeared on television, today’s deficit crisis shows how both entitlements need comprehensive reform to last through the 21st century:
- At the time of its enactment in 1965, actuaries for the House Ways and Means Committee projected that in 1990, Medicare Part A would spend $9.1 billion on hospital services and related administration. In reality, spending in 1990 totaled nearly $67 billion – more than seven times the original estimates.
- Prior to its enactment, the Medicare Part B program for physician services was projected to be funded through a $3 monthly premium, supplemented by “federal appropriations of about $500 million a year from general tax revenues.” In 2009, Medicare Part B relied upon $162.8 billion in federal general revenues – an increase of more than 4800 percent in inflation-adjusted spending.
- According to the Medicare trustees report, the program is scheduled to run a $39 billion deficit this fiscal year, and is NEVER projected to achieve balance. By comparison, the entire Greek government ran a deficit of only about $35 billion last year.
- At a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing unfunded mandates on state Medicaid programs totaling at least $118 billion.
- Table 3-1 of CBO’s long-term budget outlook confirms that from 1975-2007 and 1990-2007, excess cost growth in Medicare exceeded that of Medicaid and all other health spending (including from private sources), raising doubts about Medicare’s ability to function as a leader in controlling health care costs.
- CBO also estimates that between now and 2035, 64% of the growth in entitlement spending, and 48% of the growth in health care entitlement spending, will be driven by demographic factors associated with the retirement of the Baby Boomers and general aging of the American population. In other words, Medicare and Medicaid need fundamental reforms; even if health care costs were brought under control, entitlement programs face significant structural difficulties, as nearly half of the growth in entitlement spending over the next generation comes from demographics, NOT rising costs.
- According to CBO’s alternative fiscal scenario – which presumes (among other things) that physicians will not receive a 30% reimbursement cut in January 2012 – Medicare alone is projected to nearly double over the next 25 years, from 3.7% of GDP to almost 7 percent by 2035.
- Between now and 2035, CBO projects that federal spending on health care will total $41.3 trillion. By comparison, according to the International Monetary Fund, the combined gross domestic product of the world’s top ten economies in 2010 was $41.4 trillion. So in other words, over the next generation, the United States will spend on its health care entitlements about as much as all the goods and services that the United States, China, Japan, Germany, France, the United Kingdom, Brazil, Italy, Canada, and India combined produced last year.
All these facts point to one central conclusion: Both Medicare and Medicaid are unsustainable in their current form. Republicans have put forward solutions to address these concerns. Where are the Democrat proposals?