PRESS RELEASE

March 13, 1997 

MEDICARE UNCHECKED COULD BANKRUPT U.S., NCPA ECONOMIST TESTIFIES

WASHINGTON, D.C. - Medicare, the nation's health care program for the elderly, will ultimately bankrupt the country if we stay on the present course, a health economist told a Senate committee today. According to the testimony, by the time today's college students retire the federal government will be spending more on Medicare than it spends on Social Security.

"Generation X is more likely to see a Social Security check than to see the government pay their medical bills during their retirement years," said John C. Goodman, president of the National Center for Policy Analysis, a public policy think tank.

"In focusing on the financial crisis of Social Security, we have been ignoring the much bigger problem of Medicare," said Goodman. "Today's young people face a nightmare in their future. As tax rates grow beyond the ability of taxpayers to pay, health care rationing will be inevitable."

Goodman, who said his calculations are based on forecasts made by the Social Security actuaries, testified before the Senate Finance Committee's Subcommittee on Health Care, chaired by Phil Gramm (R-Texas). The committee is investigating the long-term funding problem in Medicare. According to Goodman's testimony:

  • By the time today's college students reach the retirement age (year 2040), total Medicare costs will be from 18 to 35 percent of taxable payroll, depending on assumptions used.
  • Medicare plus other government health spending on the elderly (Medicaid, Veteran's Administration, etc.) could claim almost one-half of taxable payroll.
  • When Social Security obligations are included, future taxpayers could have to pay as much as two-thirds of their income to support the elderly if current programs are continued.

"It is unrealistic to expect that we will be able to collect anywhere near that amount of money from future taxpayers," Goodman said. He contends that the problem is created by rising health care costs and a "chain letter approach to financing the program, under which each generation looks to the next generation to pay its benefits. The only solution is to move to a fully funded program, under which each generation pays its own way."

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The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C. Internet: http://www.ncpa.org

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