$1.4 Trillion Medicare Cash Deficit Under Obama

July 31, 2014

On July 28, the Medicare Trustees issued their annual report on entitlement programs. Douglas Holtz-Eakin, Gordon Gray and Conor Ryan of the American Action Forum delve into the details, explaining why Medicare is in serious trouble.

According to the Trustees, Medicare will go bankrupt in 2030 and Social Security will follow just three years later, in 2033. Many were pleased that Medicare's bankruptcy date had been pushed to 2030, as previous projections had expected the program to run out by 2026. But as the American Action Forum (AAF) report shows, there is no reason to be anything other than concerned about Medicare's solvency:

  • Medicare took in only $283 billion in 2013 but spent $583 billion. That shortfall was 40 percent of the federal deficit in 2013.
  • Since 1965, the Medicare program has had a cash shortfall every year, with the exception of two years (1966 and 1974), totaling $3.4 trillion. The program borrows tax revenue from other programs in order to cover the shortfalls.
  • More than one-fourth (29.3 percent) of the national debt is due to the Medicare shortfall.

The program is not sustainable:

  • In order to balance Medicare Part A, the payroll tax would need to increase by 21 percent.
  • To balance Medicare Part B, premiums would need to rise by 392 percent; the average senior would see his annual premiums rise to $4,935 from $1,259.
  • Finally, to balance Medicare Part D, premiums for prescription drugs would need to rise 704 percent, meaning that seniors' annual drug premiums would increase from $360 to $2,534.

According to the AAF, from 2009 to 2013, President Obama has overseen a Medicare cash deficit of more than $1.4 trillion.

Source: Douglas Holtz-Eakin, Gordon Gray and Conor Ryan, "The Future of America's Entitlements: What You Need to Know About the Medicare Trustees Report," American Action Forum, July 28, 2014.

 

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