Medicare Warning Now Declared

June 10, 2007
"A 'Medicare Funding Warning' Has Now Been Declared"

There was a bit of a sleeper in the 2003 Medicare reform law - it looks like action on Medicare will be triggered this February, though it's hard to imagine much happening because of it:

The coming crisis for Medicare, by Thomas J. Healey, Commentary, Boston Globe: The Trustees of the nation's Medicare trust funds have just released their 2007 annual report, and once again the news is grave. As the result of health care costs increasing at a much greater rate than wages, the hospital insurance trust fund is projected to be exhausted by 2019. ...

Medicare's main source of money is supposed to be the dedicated revenues generated by premiums and payroll taxes. But because of the rapid growth of Medicare expenditures, program costs financed by general revenues are projected to exceed 45 percent in 2013.

Under the 2003 Medicare reform law, whenever a forecast says that the 45-percent threshold will be crossed within the next seven years, the trustees are to issue a determination of "excess general revenue Medicare funding." That determination has now been made in two consecutive years, so a "Medicare funding warning" has now been declared.

The warning requires President Bush to propose legislation that responds to the alert within 15 days of the release of the fiscal year 2009 budget -- in other words, in early February 2008. The law then requires Congress to consider the president's proposals on an expedited basis.

No one can predict the outcome of this exercise. But it will at least focus lawmakers' attention -- and the public's...

We will hear more a lot more about this, so let's focus our attention in the right place. We don't have a Medicare crisis. The problem is our health delivery system generally, and rapidly escalating costs, unserved segments of the population, projected problems with Medicare, and so on, are all symptoms of this more general issue. To solve this, we'll need to decide how best to satisfy our desire for efficient delivery of health services, equity in treatment, and rapid technological innovation that promises both new treatments improved delivery of existing services in a system-wide approach to reform. So far both Edwards and Obama have taken large steps in the right direction, but we've yet to hear much from the Clinton camp, so the full spectrum of policy proposals is not yet known.

Posted by Mark Thoma on June 10, 2007 at 03:54 AM in Economics, Health Care, Politics