Trustees Paint a Bleak Picture for Medicare

To say the financial condition of the Social Security and Medicare programs remains challenging is an understatement, but one made none the less by the board of trustees in a summary of the 2009 Annual Reports, issued May 12.
“Today’s report should trouble anyone who is concerned about the future of Medicare and health care in America,” Health and Human Services (HHS) Secretary Kathleen Sebelius said in a joint statement regarding the Medicare trustee’s report issued the same day.
“This isn’t just another government report,” Sebelius said. “It’s a wake up call for everyone who is concerned about Medicare and the health of our economy.”

According to the report, projected long run program costs are not sustainable under current parameters. Medicare’s Hospital Insurance (HI) trust fund, for example, is spending more than it is taking in and projected to run out of reserves in 2017. The Medicare Supplementary Medical Insurance (SMI) trust fund, which pays for physician services and the prescription drug benefit, will remain solvent only as long as cost increases are passed on to beneficiaries. At that point, the system will only be able to pay 81 percent of hospital insurance costs.
Medicare trustees estimate the 2.9 percent of workers’ wages dedicated to Medicare today would have to rise to 6.78 percent to support Medicare by 2083 or services would have to be reduced by 53 percent. Last year, Medicare’s costs were equal to 3.2 percent of gross domestic product (GDP). By 2083, they’ll rise to 11.4 percent.
Sebelius said in her statement that HHS is working “to keep Medicare costs in check,” and referred to the president’s budget, which includes new quality incentives and provides a 50 percent funding increase to eliminate health insurance fraud, as another “crucial step.”
The Medicare trustee’s complete 2009 Annual Report is available on the HHS Web site.