Paul’s Medicare analysis echoes some of my earlier points regarding the positive impact of health reform on the Medicare’s finances, and he also pre-empts some potential silliness re claims of “bankruptcy!”
The projected insolvency of the HI trust fund doesn’t mean that Medicare is “running out of money” or “going bankrupt,” as is sometimes suggested. Even in 2026, when the trust fund is projected for exhaustion, incoming payroll taxes and other revenues will be sufficient to continue paying 87 percent of program costs. Moreover, trustees’ reports have been projecting impending insolvency for four decades, but Medicare has always paid the benefits owed because Presidents and Congresses have taken steps to keep spending and resources in balance in the near term.
My emphasis, but why do I emphasize that point? Because it is a reminder that these programs are not some natural physical entity like the climate or the oceans. They are institutions that we have created–that every advanced economy has created–in order to provide retirement security to those who have come before us. We can nurture them and ensure their solvency, or we can break them. Neither outcome is inevitable–we must choose.
In determining that choice, I suggest we listen carefully to Bob Greenstein’s reminder about the importance of Social Security benefits to retirees’ incomes:
Nearly every American participates in Social Security, first as a worker and eventually as a beneficiary. The program’s benefits are the foundation of income security in old age, though they are modest both in dollar terms (elderly retirees and widows receive an average Social Security benefit of $15,000 a year) and compared with benefits in other countries (Social Security benefits replace a smaller share of pre-retirement earnings than comparable programs in most other developed nations). In fact, the median income of elderly married couples from all sources other than Social Security equaled just $23,000 in 2010; for non-married elderly people (including widows and widowers), median income from other sources equaled only $3,000. And millions of beneficiaries have no income other than Social Security.
Absent these benefits, about 44% of seniors would be poor; with them, their poverty rate is 9%.
I get that these trustees reports are a touch on the dry side–that’s why the good folks at CBPP summarize the good parts for you. But if you believe, as I do, that these programs are national treasures, then responsible stewardship means paying attention to their financial health and taking the necessary steps to shore them up. As Bob and Paul’s analyses reveal, those steps are by no means huge, and they can and must be implemented in ways that protect vulnerable beneficiaries. The sooner we take them, the better.