April 27, 2012

 

Key Take-Aways The 2012 Medicare Trustees Report projects Medicare insolvency in 2024 based on current law assumptions; this is the same prediction as the Medicare Trustees made in 2011. Current law assumptions are highly uncertain; more realistic and likely assumptions will drive Medicare costs higher and faster. The House-approved budget saves Medicare for current and future generations with no disruptions for those in and near retirement.

The 2012 Medicare Trustees report is yet more evidence of the President’s failure to address Medicare’s core challenges, many of which continue to harm beneficiaries in the absence of real structural reform.

 

The Medicare Trustees explain in their report that the long-range financial condition of the program has deteriorated since last year’s report but that the predicted date of insolvency for the Medicare Hospital Insurance (HI) Trust Fund remains at 2024.[1] 

 

Why does this matter to beneficiaries?  As the Trustees explain:  “if assets were exhausted, Medicare could pay health plans and providers only to the extent allowed by ongoing tax revenues—and these revenues would be inadequate to fully cover costs.  Beneficiary access to health care services would rapidly be curtailed.”  (emphasis added) 

 

So one year after the Trustees’ initial projection of insolvency in 2024, nothing—on balance—has changed except that we are one year closer to insolvency and reduced beneficiary access.  We’re heading inexorably toward a health care disaster for seniors, but the president and Congressional Democrats refuse to offer a solution.

 

Moreover, the Trustees go out of their way to explain that the current law assumptions on which this 2024 prediction is based are highly uncertain and that more realistic assumptions will drive Medicare costs higher and faster. [2] 

 

• The Trustees are clear:  “Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current law projections in this report.”   By how much?  According to the Trustees, “given these uncertainties, future Medicare costs could be substantially larger than shown in the Trustees’ current-current law projection…Medicare expenditures are likely to exceed the intermediate projections shown in this report, possibly by quite large amounts.”  (emphasis added)

 

• Under current law assumptions, Medicare’s costs are expected to rise from 3.7% of GDP to 6.0% in 2040 and 6.7% in 2085.  However, under the Trustees’ alternative scenario with more realistic assumptions, costs would rise to 7.0% of GDP in 2040 and 10.3% in 2085.  “Growth of this magnitude,” explain the Trustees, “would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the federal budget.”

 

• The Trustees tie this uncertainty directly to the availability and quality of care for Medicare beneficiaries.  The Trustees write “if the health care sector could not transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity…then the availability and quality of health care received by Medicare beneficiaries relative to that received by those with private health insurance would fall over time.”  (emphasis added)  Yet the President continues to ignore this challenge and the Trustees’ warning that systemic reforms are needed now to avoid program disruption and to allow for expectations to adjust.

 

Instead of responding to yet another call to action from the Medicare Trustees, the President’s takeover of health care law stripped more than $500 billion from the Medicare program to help pay for new entitlements we cannot afford.  The failure of the president to take seriously the warnings of Medicare’s Trustees belies either a lack of understanding of the magnitude of Medicare’s challenges or, more likely, a willingness to put election year politics above the real needs of America’s seniors.  This is particularly unfortunate because, as noted in the Trustees’ report, if current law assumptions do not hold as they undoubtedly will not, “further policy reforms would have to address much larger financial challenges than implied by the current-law projections.”  (emphasis added)

  

Spotlight House Republicans take on these challenges with a budget that ensures Medicare can fulfill the promise of seniors’ health security for generations to come.  Premium support, competitive bidding, and more help for those with lower incomes and greater health needs will ensure guaranteed affordability and improved access for America’s future seniors. An updated health care “Win the Debate” kit is available here.