NCPA - National Center for Policy Analysis

MEDICARE REFORM

February 22, 2005

Compared to the recent debate over Social Security reform, Medicare has drawn very little attention from Washington leaders, and experts are growing concerned, says the Houston Chronicle. Observers say Medicare is heading for a fiscal crisis of its own, with spending for the health insurance program surpassing Social Security's in the next 20 years.

U.S. government agencies have estimated:

  • Medicare spending will increase 150 percent, to $766 billion a year, whereas Social Security spending will grow 80 percent to $888 billion a year during the same time period.
  • By 2024, Medicare costs will top those of Social Security, and by 2078, Medicare costs will double those of the retirement system.
  • In 15 years, Medicare will require almost 25 percent of federal income tax revenue, compared to 7.5 percent today.

Observers believe the reluctance to tackle Medicare stems from the complexity of the problem and the belief that any solution is linked to curbing overall health care costs.

The government's options for covering the financial shortfalls of Medicare include raising the share that patients pay, boosting the Medicare payroll tax, borrowing from the general fund or reducing payment rages to hospitals and other medical providers. Other solutions are on the table but they are more extreme and controversial, like scaling back benefits for wealthier people who have other health insurance, say observers.

Source: Bennett Roth, "Experts Sound Medicare Alarm: Observers say the program will be in more trouble than Social Security," Houston Chronicle, February 6, 2005.

 

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