Medicare Program Faces Fiscal Doom Amid Rising Unfunded Liability and Short-Term Deficits

National leaders are under scrutiny for their handling of the Medicare program, which is predicted to run dry by 2019, seven years sooner than previously estimated. The program's finances have taken a major downturn, despite President Bush's promises to strengthen its long-term financial security. Citizens Against Government Waste (CAGW) President Tom Schatz has criticized politicians for ignoring the problem and making it worse through costly additions, such as the new prescription drug benefit.

Key Takeaways:

• The Medicare trust fund for hospital bills is predicted to run dry by 2019, seven years sooner than previously estimated, largely due to the new Medicare bill.
• The program's finances have taken a major turn for the worse, despite President Bush's promises to strengthen its long-term financial security.
• The seven-year adjustment is the largest lurch toward projected insolvency in the program's 39-year history.
• Congressional efforts to reduce healthcare costs are failing miserably, resulting in higher premiums for Medicare patients in the near future.
• The report stated that changes to the law account for two years out of the seven-year acceleration toward fiscal insolvency.
• The prescription drug benefit is not included in the estimate because it will be funded out of general revenue, not the hospital trust fund.
• Over the next 75 years, Medicare will have an unfunded liability of $27.7 trillion, with $8.1 trillion of that coming from the new drug benefit.
• Medicare's unfunded liability currently hovers around $40 trillion.
• A number of short-term problems are plaguing the program, including a $10.3 billion deficit in the program that pays for doctor's visits last year and a projected $1.7 billion deficit this year.
• Taxpayers have been subjected to a round of tax-financed TV ads promoting the new drug benefit, an issue currently under investigation by the General Accounting Office as to whether they constitute "covert propaganda."

Statistics:

• $27.7 trillion: Medicare's unfunded liability over the next 75 years
• $8.1 trillion: Unfunded liability attributed to the new prescription drug benefit
• $245 billion: Actual cost of Medicare in 2003, compared to the predicted $26 billion in 1965
• $40 trillion: Medicare's current unfunded liability
• $10.3 billion: Deficit in the program that pays for doctor's visits last year
• $1.7 billion: Projected deficit in the program that pays for doctor's visits this year
• 1965: The year Medicare was predicted to cost $26 billion in 2003, but instead cost $245 billion

Sources:

• Citizens Against Government Waste (CAGW) press release, March 24 /PRNewswire/
• General Accounting Office (GAO) investigation into tax-financed TV ads promoting the new drug benefit