The Coming Medicare Crisis

The editors of the Washington Post urge Congress to act to remedy the problems with Social Security and Medicare before there’s a crisis:

The trustees for Medicare and Social Security released Thursday their yearly projections of how these cornerstone old-age entitlements will fare as more Americans begin drawing benefits and coverage costs rise. They concluded that the Old-Age and Survivors Insurance Trust Fund, which finances retirees’ monthly Social Security checks, will run through its reserves by 2034. At that point the tax revenue stream backing the fund could pay for only about 77 percent of promised benefits.

Meanwhile, the Medicare trust fund financing old-age hospital spending will run short by 2028, and spending on other elements of the Medicare program, which is backed by general tax revenue, is set to balloon. Taxpayers are on the hook to pay massive amounts to keep them running in their current forms. Medicare will gobble up ever-increasing amounts of national wealth — from 3.9 percent of gross domestic product this year to 6 percent by 2040 and 6.5 percent by 2070. If, as expected, Congress adjusts Medicare payments so that doctors continue to take Medicare patients, Medicare spending would expand to 8.6 percent of GDP by the end of the century.

These numbers may seem small. They are not; total federal spending has historically hovered around 20 percent of GDP. The trustees are projecting a vast expansion of outlays for the elderly that would hollow out the government’s ability to spend on education, infrastructure, anti-poverty programs and other investments in children and working-age adults.

It’s not a surprise; we had ample warning. We have known that these developments would take place for 60 years. 12 years for the Social Security Trust Fund is an eternity in a Washington, DC focused with single-minded intensity on the next five months. 6 years for Medicare is hardly better.

Adding insult to injury like it or not 2028 will not be during the Biden Administration. It will be the problem of President Biden’s successor whoever that might be. The political circumstances are not conducive to addressing the problem.

Furthermore I don’t believe our political leaders know what to do about the problem or to repurpose German Foreign Minister Joschka Fischer’s witticism, they know what to do but they don’t know how to do but keep their jobs. It has been quite clear for 20 years that the main difference between the United States and other developed countries is not merely our healthcare system but that the United States isn’t willing to control healthcare spending.

The simplest thing that Congress could do is nothing, something well within its wheelhouse. Based on legislation enacted long ago that will cause Medicare reimbursement rates to fall to a “sustainable” level. Contrary to the editors’ fears that doesn’t seem to have much effect on the number of physicians who accept Medicare patients. That supports my hypothesis about Medicare reimbursement rates rather than the prevailing wisdom.

A more complicated solution would be to limit what is covered by Medicare but that would be politically fraught and require a prudence and attention to detail we haven’t seen from Congress. Another alternative would be to increase taxes which would be even more politically fraught.

I expect Congress to do nothing.