Health care reform will shore up Medicare

The trustees for Medicare and Social Security warned that the Medicare trust fund, which pays for hospital care for the elderly and disabled, will run out of money by 2017, just eight years away.  This adds to the case that health reform is urgent.

	Credit: Los Angeles Times

The trustee report, with solvency projections, comes out every year, so it's not a surprise that the Medicare fund was headed for trouble. What's new is how fast the fund will go into the red.   As recently as 2002, it wasn't expected to run out until 2030.  Even last year, the projection was that we had 11 more years of money.

The reason for the sooner-than-expected red ink: largely the economy.  With more people out of work, the government isn't collecting as much in payroll taxes. (Social Security and Medicare are financed by a 15.3 percent tax, paid half by employers and half by workers.)

The recession comes on top of problems that have been undermining Medicare's solvency for years: medical costs growing much faster than payroll taxes; people living longer; baby-boomers starting to reach retirement age.

To fix Medicare, we need health reform that reins in cost growth.  The new secretary of Health and Human Services, Kathleen Sebelius, said in a statement, "The only way to slow Medicare spending is to slow overall health system spending through comprehensive and carefully crafted legislation."

In addition slowing costs generally, reform that gives everyone get access to care would mean that people are healthier, on average, when they join Medicare at 65.  As Igor Volsky points out on the "Wonk Room" blog:

"A recent study found that 'chronically ill people turning age 65 who were previously uninsured had lower spending than insured people prior to Medicare. Yet once on Medicare, these uninsured Americans spent 50 percent more than previously insured Medicare beneficiaries who also had chronic disease.' If, as one study suggests, being uninsured increases spending by 50 percent, 'having 2.4 million more chronically ill Americans join Medicare as uninsured rather than previously insured could raise its costs by $2.4 billion per year in 2005 dollars."