NCPA - National Center for Policy Analysis


May 7, 2007

The U.S. Treasury department's annual reports for Social Security and Medicare -- all 460 pages, five pounds worth -- met the usual so-what, ho-hum reception by both the national media and congressional leaders, says Matt Moore, senior policy analyst at the National Center for Policy Analysis.

But this time, just maybe, it will turn out different, says Moore. This time the president and Congress have to do something about it:

  • An obscure provision in the 2003 law that added prescription drugs to Medicare requires the Medicare trustees to raise a flag if two consecutive reports predict Medicare will draw more than 45 percent of its funding from general revenues within the next seven years.
  • In short, if Medicare is expected to drain too much income tax money from the federal government within the next seven years, the trustees have to alert Congress.
  • The 2006 report was the first to cross the threshold, and this year's report required the trustees to officially sound the alarm.

Both the president and congressional leaders should take the warning to heart: Medicare is growing really fast, says Moore:

  • Within the next two decades, Medicare will drain almost a quarter of federal income tax revenue.
  • By 2030, about the midpoint of the baby boomer retirement years, Medicare will take more than a third.
  • Eventually, Medicare spending will drain nearly every tax dollar the government raises; in all, we're talking somewhere in the neighborhood of $60 trillion.

As a result, we need to rethink how Medicare works, says Moore. For example, we could combine all the parts of Medicare, including the prescription drug benefit and individually-purchased Medigap policies, into a single plan with a single premium. In addition, people should be allowed and encouraged to save money while working to fund future elderly health care benefits.

Source: Matt Moore, "Triggering a Medicare debate," Washington Times, May 2, 2007.


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