Surprise! The government is running out of money. Most people expected that with over six trillion in spending in the last year for Covid relief and paying people to stay at home, but there are other entitlements facing bankruptcy sooner than you might expect.
Social Security and Medicare have been the “third rail “of politics for many years because so many Americans depend on these entitlements. But the latest report from the annual Social Security and Medicare Trustees should alarm everyone. The Trustees project that Medicare Part A (hospital payments) will run dry in 2026. The two Social Security trust funds for disabled individuals and seniors won’t be exhausted until 2034, but don’t count on Congress to be the first to cut their own retirement benefits to save the day.
I mentioned the impending insolvency of Medicare Part A in my last post, Expanding Medicare a Bad Idea, but today I want to elaborate on that truth.
The Medicare Trustees project that hospital spending will exceed revenue by $578 billion over the next decade and grow to 4.34% of payroll in 2031 from 3.64% this year. Social Security costs are projected to rise to 16.3% of payroll in 2031 from 14.1%. These projections could be altered by changes in labor force participation, wage growth, interest rates, inflation and healthcare utilization. Since all of these demographics are currently trending in the wrong direction, these assumptions are probably optimistic.
What will happen when the money runs out? The Wall Street Journal editorial board says the government will have to tap into the general revenue funds to pay the bill. The impact of this will be a squeeze on defense and discretionary spending and soaring taxes. Both of those responses are already being used to pay for the social welfare and climate change agenda of the Biden administration. Right now, Congress is debating cuts in defense spending and raising taxes that will weaken our national security and slow our economic recovery – and they aren’t even talking about the insolvency of Medicare and Social Security! Our allies and our enemies are watching closely as we weaken our defenses and stifle our economy.
What other measures might be taken to stem the insolvency tide? Medicare provider and insurer payments would have to be cut by 9% when the hospital trust fund goes insolvent to bring spending in line with revenue, according to the Committee for a Responsible Federal Budget. Once the Social Security trust funds go broke, beneficiaries would face a 22% across-the-board cut.
Raising the eligibility age for Medicare would be another option – but Democrats are pushing just the opposite approach, lowering eligibility to age 60. Previous attempts to raise the eligibility age to just 67 have been unsuccessful – even when Congress was less divided.
WSJ editors say the more likely scenario will be rationing of care, which is common in government-run healthcare systems in countries like the United Kingdom, Canada, and Sweden. That means the government, not your doctor, will determine if you are eligible for a new knee replacement, a costly heart surgery, or the latest chemotherapy for your cancer diagnosis. Already many liberals are pushing back against the new Alzheimer’s drug treatment because they don’t believe the cost is justified for treating elderly patients.
I agree with the editors since the Democratic party has been pushing for socialized medicine for many years and rationing healthcare comes with every socialized system, by whatever name you choose. Vermont Senator Bernie Sanders pushed Medicare for All during his presidential campaign, but this threatened the beloved private insurance of many Americans so the party chose Joe Biden. These changes to Medicare will slowly achieve the same purpose for seniors under the guise of keeping Medicare solvent. It’s a good way to let the camel get his nose under the tent.