Fix Medicare first
A Times Editorial
The financial difficulties facing Medicare are more immediate - and more severe - than those facing Social Security.
Published February 13, 2005
A recent Associated Press poll shows declining confidence in President Bush's domestic agenda, particularly among older Americans. While the poll didn't make a connection between its findings and the president's effort to privatize Social Security, there would appear to be more than a coincidence. So it is not clear why Bush would choose to take on Social Security, a relatively stable program, and ignore a much more pressing need: bolstering Medicare's shaky finances.
None other than the board of trustees for Social Security and Medicare, all of whom are appointed by Bush, put the comparative risk in perspective. The Social Security trust fund is good for another 37 years, the trustees reported in their most recent annual report. The trust fund for hospital insurance (referred to as HI) under Medicare will be tapped out in 14 years. In fact, HI is already dipping into the fund to meet expenditures, while that day is more than a decade away for Social Security. (The medical insurance portion of Medicare that covers doctors' fees and the upcoming drug coverage are treated differently, because the law requires that they be fully funded each year by recipient fees and general revenue.)
So by that measure, Social Security is more financially solid. There is an even better way to assess the coming challenge as the nation ages and the workforce shrinks: the percentage of economic output each of the programs consumes. The bottom line in the trustees' own words is this: "As we reported last year, Medicare's financial difficulties come sooner - and are much more severe - than those confronting Social Security."
In fact, the speed with which Medicare's costs are overtaking Social Security's is startling. Social Security costs are 4.3 percent of gross domestic product, and will rise to 6.6 percent in 2078. To be sure, that is something to be concerned about.
While the cost of Medicare is only 2.7 percent of GDP today, the trustees project it will soon surpass Social Security, rising to nearly 14 percent of GDP in 2078. In other words, Medicare will become twice the drag on the economy as Social Security.
One explanation for that trajectory is that the cost of health care is rising faster than overall inflation. Any serious effort to get Medicare under control will probably require retirees to bear more of the cost of their health care, and that won't be an easy sell. Then again, neither is a fix for Social Security. If Bush told Americans the truth about his plan to create private accounts under Social Security, he would admit that most retirees will probably end up with less money than they would have under the existing program.
Challenged to address Medicare's problems, Bush said he would get to it right after he takes care of Social Security. No one can say when that will be, but Americans should respond with this question: Why wait?
[Last modified February 13, 2005, 01:07:16]
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