The Medicare Headline You Didn’t See (and won’t)
For years we have been regaled with scary, scary numbers about how Medicare’s projected unfunded liability was in the TENS OF TRILLIONS. And sure enough if you consulted the Medicare Report and examined the actuarial projections for Medicare Part A you would find that number. But a funny thing happened with the 2010 Report and is shown in the data table above: the 75 year number is down to $6.9 trillion, a big number but only 0.5% of projected GDP over that period, and the infinite future number is actually a $600 billion SURPLUS.
Oddly this multi-multi trillion dollar turnaround did not result in banner headlines in the NYT or the WaPo, nor did congratulatory telegrams pour into the offices of Nancy Pelosi, Harry Reid and dare I say it Barack Obama from the folk at Cato and Concord that have been weeping bitter, bitter tears about ‘intergenerational inequity’ and begging us to ‘think about the grandchildren’. Because that is not how they roll nor was any of this what the kerfluffle has been about. The fundamental hostility to Medicare among the self-style deficit hawks is not because it is broken, but instead because it works. For them that infinite future $600 billion SURPLUS is terrible, terrible news. Which is why it never made it to the inboxes of Lori Montgomery and Perry Bacon at the WaPo, though you can bet big that any deterioration would have. Funny that.
Okay, okay, admittedly this number is only for Part A and doesn’t address the big big issues confronting Part B and D. Then again opponents were using Part A numbers to spread the hysteria (for technical reasons Parts B and D don’t have ‘unfunded liability’ as defined by the Trustees, no matter how out of whack their projections may be). So fair is fair.
And also the Chief Actuary of Medicare has issue a dissent, he doesn’t believe that in this case current law, which by rule is what the Report is based on, will hold. And he may be right. But I am just playing by the rules established by the crisismongers, Cato and Concord lived by the bottom line number and now they are stuck with it. Too bad, so sad.
I saw this headline many places.
Question: does this assume obamacare has a successful implementation and transition?
If so, it is a real stretch.
Bruce, have a good weekend. Thanks for all the dilgence and work.
Bruce, care to give us a link to the report so we can look at the internals?
Tks.
i have serious doubts about any projections past next months, as most have been wrong recently…so now im supposed to look at a 75 year projection?
lets see, who in 1935 could have correctly forecast ANYTHING about today’s economy?
I suspect that Republican schemes to defund or repeal the ACA will come to little or nothing. Don’t think that the states which are already receiving funding for the Medicaid program will want to give it up. People who are already starting to be eligible for high risk pool coverage will probably be disinclined to give it up for the sake of political purity. And, the insurance companies stand to gain a great deal by the ACA.
Nothing in ACA prevents the HI companies from raising rates which, of course, they are doing as we speak. So, more guaranteed policy holders and higher premiums. Not a bad deal for them, so they’d probaably like to let it ride for a while. So, those who seek to repeal it may find lobbyists explaining the system to them in great detail. Bottom line–no soup for you, sucker, if you mess wid our gold mine! NO
More on ACA Repeal–The original class of ’94 had a number of goals it abandoned because the Executive Branch was stronger than they thought. It’s more likely than not that any new freshmen members of Congress would have the same experience. In any event, nothing changes overnight. The new freshmen cannot make their revolution happen as fast as their constituents want. Wouldn’t you know it? One term makes you part of the problem. I’d bet on the ACA being there for a considerable while. NancyO
rusty:
Yes
rjs
i’d agree with you as long as you… and the rest of the country… understand that the 75 Trillion dollar projection (over the infinite horizon?) is pure bunk.
the important thing to keep in mind is that health care is something you are going to have to pay for, whether you pay through Medicare or through some private plan. Medicare will be cheaper and safer.
The 6.9 Trillion 75 year projected deficit is in the same range as the SS (OASDI) deficit, which i have shown amounts to 20 cents per week per year (in today’s terms). So what you are talking about is a similar raise in your health insurance after retirement bill. Not a staggering burden. It only looks staggering when it is reported as Trillions of dollars…. for a hundred million people for 75 years and a “government expense.”
With reasonable reforms in our sacred way of delivering health care, the cost could be cut in half. It probably won’t be cut much more than that. So tell me seriously, can you tell the differentce between 6 Trillion and 3 Trillion?
(the answer is that if you think you can you don’t understand the question.)
Just to restate Bruce’s point
for those that didn’t get it.
Good news about Social Security doesn’t get reported by the main stream media.
Think about that.
Second point (mine) is that if the Obama health plan … which i dont like … makes huge cuts in the cost of Medicare, imagine what a real reform … in medical care … could do.
That’s a reform in medical care, not a “reform” in Medicare.
“But a funny thing happened with the 2010 Report and is shown in the data table above: the 75 year number is down to $6.9 trillion, a big number but only 0.5% of projected GDP over that period, and the infinite future number is actually a $600 billion SURPLUS.
“Oddly this multi-multi trillion dollar turnaround did not result in banner headlines in the NYT or the WaPo, nor did congratulatory telegrams pour into the offices of Nancy Pelosi, Harry Reid and dare I say it Barack Obama from the folk at Cato and Concord that have been weeping bitter, bitter tears about ‘intergenerational inequity’ and begging us to ‘think about the grandchildren’.”
😉
But still, it’s GIGO. 🙁
Well I’ll call Goose and Gander on the GIGO.
The Peterson folk were perfectly happy to use the $36.4 trillion number from the 2009 Report (which oddly is mostly cited as $38 trillion). There are plenty of relevant hits on ‘medicare unfunded liability’ for example we get this Op/Ed from WSJ Online from 2009
http://online.wsj.com/article/SB124268737705832167.html
“Try to follow this logic: Last week the Medicare trustees reported that the program has an “unfunded liability” of nearly $38 trillion — which is the amount of benefits promised but not covered by taxes over the next 75 years. So Democrats have decided that the way to close this gap is to create a new “universal” health insurance entitlement for the middle class.
Such thinking may be a non sequitur, but it will have drastic effects on the health care of all Americans”
I am not waiting up for a retraction/update.
75 years from now the United States of the World will be transferring the consciousness of everyone over the age of 50 into military robots known as Cylons and transferring them to Mars to fight off incoming space aliens.
Or maybe not.
“Question: does this assume obamacare has a successful implementation and transition?”
The Trustees and the Office of the Chief Actuary by law have to assume current law. And as CBPP points out the history of Medicare has shown that major legislation was in fact implemented though I guess you could have a debate of the meaning of ‘successful’.
Plus this seems right in line with the result of an extrapolation of the CBO ten year score, really no one should have been surprised at this outcome. Which isn’t enough excuse not to report it since there are still people running around with “tens of trillions” in their heads.
coberly, my disagreement is not with medicare, nor the underlying premise of bruce’s post…it was just exasperation with any 75 year projection, especially after we’ve seen last weeks existing & new home sales come in so far below the forecasts, and this weeks ISM manufacturing index surprise to the upside, and unemployment come in below expectations…
you can do a lot of extrapolation of current trends several years out, but all it amounts to is a thought experiment….it really has nothing to do with what might or might not happen, and can hardly be used as the basis of argument…
rjs projecting next year’s job number is hard, establishing a reasonably high probability range of possible long term outcomes for a large population not so much. Now I certainly agree that the 75 year window is not the right one in which to frame current policy, on the other hand I have a great-niece that I fully expect will still be alive and well at the end of that 75 years, asteroid strikes and pandemics aside.
But the point is one made elsewhere in the thread, we have a rhetorical battlefield where one side claims the right to use infinite future numbers as convenient only to rediscover the wonders of probabilistic uncertainty when those numbers move against them, I am just pointing out to people who like to cite “tens of trillions of dollars of unfunded liability” and to then guilt trip me into giving up my retirement benefits for the theoretical advantage of generations unborn that they numbers underpinning that argument don’t exist anymore and that the inherent uncertainty shown by the fact that a legislative change in 2009 can move $38 trillion around makes the reliance on those numbers pretty suspect all along.
This number is a huge embarrassment to David Walker and pals which is why I am inclined to shout it from the rooftops.
Asteroid strikes are not that big a deal, but comets are a planet killer.
Citations:
Lucifer’s hammer / Larry Niven and Jerry Pournelle 1983.
Depends on the asteroid. Whatever caused Tycho crater sent fracture lines out for hundreds or thousands of miles.
http://en.wikipedia.org/wiki/File:Tycho_Crater.jpg
Some of the larger objects in the Asteroid Belt would probably shatter the Earth and not just wipe out higher life forms.
Y’all–Along this line, I’ve been thinking that there is a sort an incentive to increase premiums because of promised subsidies for lower-income insureds. Since the feds will provide subsidies for some people up to a limit based on their income, it seems likely that premiums will rise at least that high, once it becomes clear how the subsidies will actually work.
But, the ACA doesn’t address the constant increases in the cost of medical services and premiums after the subsidies are exceeded. The cost of medical care increases at a rate greater than inflation or without regard to our current deflationary trend. So,medical costs will keep going up until subsidies can no longer make HI premiums affordable to almost all insureds. Then, they may have to confront new calls for single payer as a way to control the cost of medical care. NanO
To continue the thought, the insurance companies will not want to give up their extremely profitable businesses. So, I assume that they will lobby for increased subsidies while trying to defeat any public option or single payer movement. Meanwhile, I can see a strong reason for businesses to stop offering health insurance benefits. But, HI companies can keep their high-end business and get into the medicaid business by seeking to offer managed care services through contracts with state and local governments a kind of non-Medicaid Medicaid. It won’t be good coverage or even especially cheap coverage, but it will not be “socialized medicine.”
How long would this take? Maybe not long at something like 9% annual inflation in the cost of medical services. Do you all have any thoughts on what will or could happen given the continued increase in costs? Nancy O.
“How long would this take?”
They will stop raising prices at the exact same moment that the USG and American citizen run out of money.
The subsidy in the new health plan is some sort of sliding scale all the way up to $80K of household income. So the insurers and providers just got themselves another line straight to the Full Faith and Credit of the USG.
Already we pay double what other civilized countries pay, and if I remember correctly healthcare is 20% of GDP.
Mexico has been trying to get the US to allow medicare to pay for visits for health care to Mexican hospitals and doctors. There is some kind of program going on where Mexican hospitals can be certified that they are up to US standard. And of course drugs cost half as much.
Or we could all just move there, but in that case Mexico should revamp their byzantine real estate industry and laws.
Bruce Bartlett noticed and ran a story in Fiscal Times. And notified me by e-mail. I’ll update the post but note that his headline didn’t quite point out my claim.
Bruce Bartlett noticed and ran a story in Fiscal Times. And notified me by e-mail. I’ll update the post but note that his headline didn’t quite point out my claim.
Well, Cedric, if the people here don’t want to pay what it costs to take care of its own then I guess it might profit us to see if the Mexican govt. will. It’d cost us less and a lot of people who can’t afford treatment here could afford it there. Assuming they could travel there. Of course. If not, too bad. As to their changing their laws, I wouldn’t hold your breath. They want our money. They don’t want us and I don’t blame ’em, come to that. NancyO
A small national sales tax 1.5% would keep social security and medicate solvent into the foreseeable future.
Everyone would contribute. Criminals, Wealthy, Unemployed etc. We are a consumer economy 70%. Since all american would eventually benefit, there would not be any objections.
Tell your congressman or Senator. Thanks
ednegola
thanks. you are exactly right as to the amount of the tax.
but social security is not supposed to be welfare, but an insurance program for workers the workers pay for themselves.
if you made it benefit from a sales tax, pretty soon someone would say, hey, we could cut the sales tax if we means tested the benefits… and pretty soon you’d be back to work houses. since at the end of the day the workers would be paying for it anyway, all you would have accomplished is broken the link between the person paying the tax and the person getting the benefit.
Nancy:
I think the subsidies will merely increase the cost of insurance faster than without the subsidies.
When you have to subsidize a product, which many consider a necessity, way past the median household income of $52,000, you’ve got a problem: a necessity priced as a luxury.
I believe we have a health care bubble, just like we have a house bubble.
Prices are going to have to deflate.
Subsidies merely delay the process and increase the debt.
Don Levit