Medicare’s Financial Outlook ‘Much Worse’ than Social Security’s

WASHINGTON–Medicare and Social Security trustees reported last
week that Medicare’s financial outlook is “much worse than Social
Security’s.”

In their annual report, released March 23, the trustees
predicted that Social Security will be depleted by 2041. The
Medicare hospital trust fund, they said, will be insolvent by
2020.

The trustees warned that the impending retirement of the baby
boomers and further increases in life expectancy will cause program
costs to grow faster than the economy. Today, there are about four
workers for every Medicare beneficiary. By 2079, there will be only
about two workers for every beneficiary.

The trust–which covers Part A funding–will be insolvent
slightly later than last year’s estimate due to higher income and
lower costs, including slower growth in inpatient hospital
benefits, in 2004. However, “Medicare’s financial outlook has
deteriorated dramatically over the past five years,” the trustees
noted, adding that the fund had negative cash flow for the first
time last year.

Monies funding Part B and the new drug benefit are projected to
remain financed into the “indefinite future,” the report said,
because the law sets financing each year to meet the next year’s
expected costs. But trustees warned that rapid cost increases will
result in substantial increases in beneficiary premiums. Part B
spending growth has averaged almost 11 percent annually in recent
years, they explained, and costs are expected to nearly double
within the next decade.

“We are looking closely at the reasons for the Part B cost
increases,” said CMS Administrator Mark McClellan, “and we will
work with physicians and other health professionals to make sure we
are getting the most for rising Medicare spending.”