Medicare Is About To Run Out of Money. Democrats Want To Make the Program Cost Even More.
To understand the implications of Democrats’ current plans for expanding federal health care programs, it’s useful to start with some context from the biggest federal health care program that currently exists: Medicare.
Last week, Medicare’s board of trustees produced their annual report on the program’s fiscal health. That report contained some expected yet nonetheless alarming news: Medicare’s hospital insurance (HI) trust fund, itself a kind of accounting fiction, will be insolvent in just five years. Starting in 2026, the HI fund, which covers inpatient hospital services, will be depleted.
The program will have to rely on the HI fund’s incoming revenues, essentially operating on a cash flow basis—and there won’t be enough cash. In 2026, the HI fund will only cover about 91 percent of its bills. In the years that follow, that gap will only grow larger. So without changes to the program’s financing, doctors, hospitals, and other medical providers will face rapidly reduced payments from the program, with ensuing ripple effects on both the wider economy, roughly a sixth of which revolves around health care services, and on the provision and availability of health care.
If anything, the program’s fiscal problems may be even worse than that: The new report assumes that an array of cost-reduction measures, including a series of technical tweaks the physician payments and bonuses, will persist. But they also note that Medicare’s “long-range costs could be substantially higher than shown throughout much of the report if the cost-reduction measures prove problematic and new legislation scales them back.”
As anyone who has even a passing familiarity with attempts to control the cost of federal health care programs through doctor payment tweaks knows, those sorts of measures often prove problematic—which is to say, doctors don’t like them, and thus, for political reasons, Congress overrides those payment changes.
In just a few short years, in other words, Medicare will face something like an existential crisis. Yet instead of attempting to deal with the program’s deep fiscal challenges, President Joe Biden and Democrats in Congress are attempting to expand the program, adding a suite of costly new benefits to the program. Rather than attempt to pay for the program that exists, or manage its growing costs, they are focused on tacking on additional expenses.
The vehicle for those additions is the $3
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