We're officially past the point where Social Security and Medicare insolvency are far-off problems that we can ignore.
Medicare is going bust sooner than we expected. And this isn't some crazy, partisan rambling. This is coming straight from the government, which just updated their numbers based on new tax data. Here's what Tim Geithner said in a statement:
"The Medicare Trustees Report makes clear today there is no more important long-term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health care services more efficiently. These savings can only be achieved in the context of a larger effort to control health care costs and improve quality more generally. The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending. The Administration is committed to working with Congress to find ways to control runaway growth in both public and private health care expenditures while helping to ensure that all Americans receive the high quality, affordable health care they deserve. The recent commitment of major health stakeholders to help lower the annual growth rate in costs by 1.5% represents a crucial step in that direction.
"The Trustees Reports come to the following conclusions.
The Medicare program's financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing health care costs and the short-term outlook has been hurt by the recession. Medicare's annual costs were 3.2 percent of GDP in 2008, or nearly three-quarters of Social Security's, but are projected to surpass Social Security expenditures in 2028 and to reach 11.4 percent of GDP in 2083, compared with 5.9 percent for Social Security.
Medicare's Hospital Insurance Trust Fund is projected to become insolvent in 2017, two years earlier than projected in last year's Report.
The cost of Medicare's Supplementary Medical Insurance (SMI) to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3 percent of GDP in 2008 to over 4.7 percent in 2083, with continued increases beyond 75 years.
As you can see, Geithner takes a measured tone in his writing, but this really is an extremely urgent crisis.
That being said, there is good news, when you take a step back. Big picture, it's not about funding Medicare or Social Security (which had its lifespan clipped by four years) it's about taking care of old people. That's not necessarily or the same thing. Medicare and Social Security may not be sustainable, but a rich society should be able to care for aged retirees.