1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196

Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

News of the Day ... In Perspective


Medicare’s financial problems deepen, Trustees say

According to the annual report released May 1, the Medicare trust fund will be depleted by 2018, two years sooner than predicted a year ago and 12 years sooner than anticipated when President Bush took office.

The Medicare and Social Security programs “form the basis of a looming fiscal crisis for our nation as the baby-boom generation moves into retirement,” said Treasury Secretary John W. Snow, one of the trustees.

Senators Charles Grassley (R-IA) and Max Baucus (D-MT) called for the resignation of public trustees Tom Saving and John Palmer, reappointed by President Bush during Easter recess to avoid the need for Senate confirmation (Wash Post 5/2/06).

Saving and Palmer are credited with changing the Trustees report to include annual updates on the value of the unfunded liabilities. This year, the combined Social Security/Medicare unfunded obligations reached $36.7 trillion on a 75-year horizon and $83.9 trillion on an infinite horizon. These figures were not included in handouts provided during a CMS briefing on the report, according to John Goodman of the National Center for Policy Analysis.

The Trustees also reported that in 2006, 12.3% of federal income tax revenues will be transferred to support Medicare; Social Security still has an excess amounting to 5.3% of income tax revenue. If present trends were to continue, Medicare alone would absorb 74.8% of income tax revenue by 2080, and Social Security 17.0%.

As part of the Medicare Modernization Act, the Trustees are required to compare overall projected Medicare expenditures with the program’s “dedicated revenues.” If the difference is projected to exceed 45% of the revenues within the first seven years of the projection period, it triggers a determination of “excess general revenue Medicare funding.” A second such determination next year would trigger a “Medicare funding warning.”

This year is the first to trigger the determination. If it occurs again next year, Congress will be required to consider action on a expedited basis, but won’t actually have to do anything.

The provision was intended to cap the amount of general revenues that could be used to support Medicare. According to a New York Times May 4 editorial, such a cap is “a perverse way to deal with Medicare’s very real financial problems,” because it “removes the most progressive source of funding from further consideration.”

President Bush proposes to create a federal commission on the plight of entitlement programs and to slow Medicare spending by $36 billion over the next five years.

Additional information:


News of the Day Archive