NCPA - National Center for Policy Analysis


January 5, 2005

The Medicare system is on the verge of collapse, according to Bruce Bartlett, a senior fellow with the National Center for Policy Analysis. The Financial Report of the United States Government for fiscal year 2004, released just before Christmas, says that the unfunded liability of the Social Security system is $12.5 trillion, an increase of $810 billion over the previous year. However, the Medicare deficit is twice as large: $24.6 trillion, an increase of $9.6 trillion from 2003.

Instead of talking about reforming Medicare, we are getting ready to make them much worse:

  • Next year, the new Medicare drug benefit becomes fully effective, which will sharply increase Medicare spending; this is the reason for the increase in its unfunded liabilities.
  • Medicare's trustees estimate the long-term cost of the drug benefit at $8.1 trillion, accounting for the bulk of the increase in its liabilities last year.

Another important difference between Social Security and Medicare is that the former's costs grow very predictably, whereas the latter's can only be guessed at because they are rising so fast. Consequently, we can formulate policies to deal with Social Security's long-term problems relatively easily. But we haven't even begun to think seriously about how to ration medical care, which necessarily must happen at some point, says Bartlett.

The Financial Report makes clear that our long-term budget trends are unsustainable and will cripple the economy, threaten national security, and reduce the quality of life for all Americans unless addressed, says Bartlett.

Source: Bruce Bartlett, "Stepping Up to the Challenge," National Center for Policy Analysis, January 5, 2004.


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