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In May, the
U.S.
Treasury
department
published
the annual
reports for
Social
Security and
Medicare.
The two
volumes —
all 460
pages, five
pounds worth
— were once
again
largely
ignored by
the national
media and
Congressional
leaders.
Not much
changed
since last
year, so
what’s the
big deal,
right?
Social
Security and
Medicare are
hurtling
toward a
cliff like
lemmings.
$88 trillion
in unfunded
promises.
Disaster,
death,
destruction.
We’ve heard
it all
before.
But this
time, just
maybe, it
will turn
out
different.
This time
the
President
and Congress
have to do
something
about it.
An obscure
provision in
the 2003 law
that added
prescription
drugs to
Medicare
(which came,
by the way,
with a $17
trillion
price tag)
requires the
Medicare
trustees to
raise a flag
if two
consecutive
reports
predict
Medicare
will draw
excessive
revenues
from the
general
budget
within the
next seven
years. The
measure is
generally
referred to
as a
“general
revenue
trigger.”
In short, if
Medicare is
projected to
drain too
much income
tax money
from the
federal
government
within the
next seven
years, the
trustees
have to
alert
Congress.
The 2006
report was
the first to
cross the
threshold,
and this
year’s
report
required the
trustees to
officially
sound the
alarm.
Now what?
Under the
trigger
rule,
President
Bush must
propose a
plan to deal
with the
imbalance as
part of his
next budget,
for 2009.
Congress is
required to
“fast track”
consideration
of the
president’s
plan.
Both the
president
and
congressional
leaders
should take
the warning
to heart:
Medicare is
growing
really
fast. Due
to the
retirement
of the 77
million Baby
Boomers --
and the
soaring
costs of
medical care
-- Medicare
will start
sucking big
bucks away
from other
treasured
federal
programs.
In just five
years,
Medicare
will drain
the
equivalent
of one in
every ten
income tax
dollars from
the federal
government’s
general
fund.
Within the
next fifteen
years,
Medicare
will drain
almost a
quarter of
federal
income tax
revenue. By
2030, about
the midpoint
of the baby
boomer
retirement
years,
Medicare
will take
more than a
third. That
means the
government
will have to
raise income
taxes by a
third or
stop doing
about a
third of
what it does
today.
Maybe we
won't miss
NASA or
federal
education
funding or
subsidies
for
farmers.
But maybe
your
favorite
program will
be the one
on the
chopping
block.
Eventually,
Medicare
spending
will drain
nearly every
tax dollar
the
government
raises. In
all, we're
talking
about an
unfunded
liability
somewhere in
the
neighborhood
of $75
trillion.
(That is the
amount we
would need
on hand
today,
invested and
earning
interest
outside
Congress’
reach.)
Throw in
Social
Security and
the total
soars to
more than
$88
trillion.
And that
doesn’t even
include the
impact of
the retiring
baby boomers
on Medicaid,
which is
almost as
big as
Medicare.
According to
Tom Saving,
one of the
Medicare
trustees, we
could fully
fund
Medicare for
the
foreseeable
future by
siphoning
off 60
percent of
all federal
income tax
revenue --
starting
today and
continuing
forever --
and setting
it aside for
Medicare
benefits.
But that’s
just not
going to
happen.
So, what
should we
do? First,
our leaders
should take
the hint:
Reform is
needed.
Traditional
piecemeal
“solutions”
like raising
the
retirement
age, bumping
up the tax
rate and so
forth might
alleviate
the current
crunch for a
couple
years, but
won't do
nearly
enough to
plug the
long-term
drain.
We need to
rethink how
Medicare
works. For
one thing,
people
should be
allowed and
encouraged
to save
money while
working to
fund future
elderly
health care
benefits.
In addition,
we could
combine all
the parts of
Medicare,
including
the
prescription
drug benefit
and
individually-purchased
Medigap
policies,
into a
single plan
with a
single
premium,
which would
help hold
down some of
the soaring
costs.
Sadly, there
is a caveat
to this
whole
story. We
know it is
vital that
we address
Medicare’s
unsustainable
growth — and
we know the
Medicare
trigger will
at least
force
Congress to
talk about
it. But,
the Medicare
trigger
doesn't
actually
force
Congress to
do anything
real about
these very
real
problems.
It requires
that a
debate take
place, yes,
but
conveniently
it doesn't
require
Congress to
actually
pass
anything.
Thus,
instead of
embracing a
real
solution
that
prevents the
indentured
servitude of
an entire
generation,
Congress may
well pass
something
painless —
for
themselves
and for the
retiring
Baby Boomers
— but also
something
that will do
nothing to
alleviate
the plight
of today's
younger
workers.
After all,
with a few
notable
exceptions,
neither
Republicans
nor
Democrats
seem to have
the stomach
for — or
much
interest in
— getting
the job
done.
Medicare’s
soaring
costs
constitute
the single
biggest
domestic
policy issue
facing the
nation
today. We
can pretend
the problem
doesn’t
exist, or
pretend that
we can wait
for the next
president or
the next
Congress to
fix it. But
very soon,
as Medicare
draws
increasing
sums of
money away
from other
federal
programs,
the pet
projects of
the next
president
and Members
of the next
Congress
will have to
compete with
Medicare for
scarce
dollars.
Maybe then
our policy
makers will
notice the
problem we
have seen
brewing for
decades.
Maybe then
they will
finally fix
it.
--###--
Matt
Moore is a
senior
policy
analyst with
the National
Center for
Policy
Analysis.
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