3 Things Driving Medicare Bankrupt

DALLAS, Texas (10/21/2015)—The 50-year old Medicare program is not aging well; and that’s not good news for seniors, according to a new report by National Center for Policy Analysis Senior Fellow Devon Herrick. The report identifies three factors driving Medicare towards bankruptcy:

1. Lengthening Life Expectancies.
Americans born in 1900 and earlier were eligible for Medicare at its inception in 1965, but life expectancy for men and women born in 1900 was under 50 years of age. Today, seniors can expect to live another 17 to 20 years after reaching Medicare eligibility, and some scientists believe life expectancies could expand by decades before the dawn of the next century.

2. Higher Spending per Capita.
In 1970, only a few years after Medicare was established, annual per capita Medicare spending was only $385. Today it is more than $12,000 and will hit $19,000 in a decade. As a percentage of GDP, the portion of Medicare that taxpayers have to bear will double in two decades—and then double again in the 50 years after that.

3. Rising Drug Prices.
In 2014, Medicare spending on drugs was 0.48 percent of GDP. This proportion will surge as specialty drugs displace spending on cheap generics. Specialty drugs accounted for one-third of drug spending in 2014 despite comprising only 1 percent of drugs prescribed. By the end of the decade, half of drug spending will be on specialty drugs.

Don’t count on the Trust Fund to keep Medicare solvent either. “The Trust Fund itself is little more than a filing cabinet of IOUs that are claims on future taxpayers,” warns Herrick. “There really is no Trust Fund in the traditional sense of one that represents assets that can be sold to alleviate the burden on taxpayers.”

You can read the full report here.