Medicare is now paying out more than it receives and it faces as a result insolvency in eight years, two years earlier than projected in last year’s report, Treasury Secretary Tim Geithner said today in a statement:
From Treasury: “The Medicare Trustees Report makes clear today there is no more important long-term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health care services more efficiently. These savings can only be achieved in the context of a larger effort to control health care costs and improve quality more generally. The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending. The Administration is committed to working with Congress to find ways to control runaway growth in both public and private health care expenditures while helping to ensure that all Americans receive the high quality, affordable health care they deserve. The recent commitment of major health stakeholders to help lower the annual growth rate in costs by 1.5% represents a crucial step in that direction.
“The Trustees Reports come to the following conclusions.
» The Medicare program’s financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing health care costs and the short-term outlook has been hurt by the recession. Medicare’s annual costs were 3.2 percent of GDP in 2008, or nearly three-quarters of Social Security’s, but are projected to surpass Social Security expenditures in 2028 and to reach 11.4 percent of GDP in 2083, compared with 5.9 percent for Social Security.
» Medicare’s Hospital Insurance Trust Fund is projected to become insolvent in 2017, two years earlier than projected in last year’s Report.
» The cost of Medicare’s Supplementary Medical Insurance (SMI) to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3 percent of GDP in 2008 to over 4.7 percent in 2083, with continued increases beyond 75 years.
Also today, trustees said that Social Security will start paying out more in benefits than it collects in taxes in 2016, and the giant trust fund will be depleted by fiscal 2037, four years sooner than earlier projections.