Morning Bell: Pictures of America’s Medicare Mess

Mike Brownfield /

Earlier this month, President Barack Obama sat down with world leaders at the G8 summit and bragged about his track record of supposed good governance — how he has worked to “bring down our deficits and debt over the longer term” and made “room to take a balanced approach to reducing our deficit and debt.” There are plenty of ways to shoot holes in the president’s pronouncement, but there is one glaring example of where he has come up far short — failing to address America’s growing Medicare crisis.

In “Medicare at Risk: Visualizing the Need for Reform,” Heritage’s Kathryn Nix and John Fleming illustrate the facts about Medicare and why Washington must come to the rescue with innovative solutions to preserve the program today and into the future.

President Lyndon Johnson signed Medicare into law in 1965, creating a program that today provides health insurance to some 48 million Americans. Now, though, that program is in desperate need of reform as the United States grapples with retiring baby boomers entering the system, increasing health care costs and a status quo that simply can’t be sustained.

Case in point: Medicare spending is growing faster than the rest of the federal budget, and it’s the main cause of America’s long-term deficits. As Nix and Fleming show, Medicare’s costs are projected to shoot through the roof, surpassing Social Security, Medicaid, Obamacare subsidies and all other non-interest spending by 2050. Want more proof on how bad the situation is? By 2040, Medicare’s shortfall will account for 81 percent of the federal deficit.

Here’s another disturbing fact: The number of workers per Medicare beneficiary is falling dramatically. Back in 1965, there were 4.6 workers contributing to Medicare for every person receiving benefits. Today, there are only 3.3 workers, and in 2030, that number will fall to 2.3. That falling ratio is leading to the program’s insolvency. And with longer life expectancy (which of course is a good thing), seniors today are collecting benefits for almost three times as long as when the program first started. That means the program is paying more benefits than ever before.

Unfortunately, the situation isn’t going to get any better absent congressional action. The Medicare trustees (who issue reports on the program’s fiscal stability) project that under current law, Medicare will rack up $26.9 trillion in unfunded obligations over the next 75 years. In a more likely scenario, that number soars to $36.9 trillion. American taxpayers will pay the costs, and seniors will suffer the effects of a program that’s going broke.

What’s that burden look like today? Working Americans pay for about 88 percent of seniors’ Medicare benefits through payroll taxes. Right now, that tax rate is set at 2.9 percent, costing a median household about $1,430 in 2010. But if Congress turns to tax hikes alone to cover the deficit in Medicare Part A (which covers inpatient care in hospitals), that rate would have to go up to 5.33 percent, costing that same household $2,630 per year.

President Obama’s health care plan makes things even worse for the very seniors Medicare serves. Nix and Fleming show that Obamacare cuts $421 billion from Medicare in order to pay for other programs that aren’t even for seniors. On top of that, a large chunk of the Obamacare cuts come from slashing reimbursement rates for doctors, meaning that seniors’ access to health care providers is at risk, with 40 percent of providers in danger of closing their doors by 2050.

It doesn’t have to be this way. The Heritage Foundation’s Saving the American Dream plan proposes reforms that would transform Medicare into a real insurance program that provides financial security to retirees and guarantees assistance to people who need it. Seniors will enroll in the health plans of their choice, much like Members of Congress and millions of federal employees do, and unlike today, all plans will include catastrophic protection.

The picture of Medicare’s future is not a pretty one, and doing nothing about it won’t improve the situation. America can’t afford the status quo, and it’s time for leaders in Washington to do more than talk a good game, but to actually enact reforms that make sure Medicare’s promise can be kept for those who need it most.

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