Medicare’s Worsening Finances: The Other Shoe Drops

Kathryn Nix / May 23, 2011

A week ago, the Medicare Trustees issued their annual report, which showed that the program is on the fact track to insolvency. The 2011 analysis projected that the Hospital Insurance Trust Fund (which funds Medicare Part A) will be insolvent in 2024, and the program’s long-term unfunded obligations—promised benefits that are not paid for—amount to $24.6 trillion. Heritage noted the highlights. Page 266 of the official report included a note from Richard Foster, the Medicare Actuary, who said the Trustees’ financial projections “do not represent a reasonable expectation for actual program operations.”

Late Friday afternoon, the Office of the Actuary (OACT) released a separate analysis detailing why the Trustees’ report is unrealistic. While the timing was curious, the reasoning is straightforward. Because the Trustees use assumptions based on current law, OACT warned, “the projections…should not be interpreted as our best expectation of actual Medicare financial operations in the future but rather as illustrations of the very favorable impact of permanently slower growth in health care costs, if such slower growth can be achieved.” (more…)