NCPA - National Center for Policy Analysis

Expanding Medicare Costs Taxpayers

June 24, 2003

Congress is on the verge of passing legislation that may significantly increase Medicare's burden on future workers, say economists Andrew Rettenmmaier and Thomas Saving. Saving is a Medicare trustee, and both are senior fellows with the National Center for Policy Analysis.

The president's budget proposed spending $400 billion over the next 10 years for new Medicare prescription drug benefits. By 2013, this will produce a 12 percent increase in projected spending. According to Rettenmaier and Saving:

  • Applying the 12 percent to annual projections of total Medicare expenses for all years beyond 2013, the new benefits will create an unfunded liability of $7.5 trillion, or almost twice the current debt held by the public.
  • Limiting the calculation to include only the benefits to be paid to current beneficiaries and current workers results in costs of approximately $2.6 trillion.

In another study using higher drug cost growth, Jagadeesh Gokhale (American Enterprise Institute) estimates that the current Senate bill will produce an unfunded liability of $12 trillion.

These are, of course, simplified estimates, but they make the point that any net expansion of Medicare imposes a cost on taxpayers, say Rettenmaier and Saving. Such a reform basically transfers the burden from retirees to taxpayers. So the question we must ask is who will pay the bulk of the cost -- retirees or taxpayers?

Source: Andrew J. Rettenmaier and Thomas R. Saving (National Center for Policy Analysis), "Another Medicare Monster," Wall Street Journal, June 24, 2003.

For text: (WSJ subscription required) http://online.wsj.com/article/0,,SB105641171293333600,00.html

 

Browse more articles on Health Issues