Paying Bills With An Overdrawn Account
"Stealing" from Medicare to Fund New Health Care Spending
Using savings from Medicare to pay for new “non-Medicare” spending is akin to paying one’s bills with checks from an already overdrawn account.
Members of Congress and the Administration would be wise to avoid using this type of budget gimmick to pay for new health care spending.
Not only does this approach hide the cost of the new spending, but it imperils the future ability of Congress and the Administration to address
the future financial problems facing Medicare. Eliminating the availability of $2 trillion in present value from future efforts to correct Medicare’s
imbalance will make the task even more daunting.
Read the analysis: Analysis
According to the 2009 Medicare Trustees’ Report, the Medicare HI trust fund faces a 75-year present value deficit of $13.4 trillion. Over the infinite
time horizon the report pegs the present value unfunded liability at $36.4 trillion.
H.R. 3200 would reduce net Medicare related spending by $214 billion over the 2010-2019 window. Gross reductions would total $499 billion
over the same period, but are offset by $285 billion in additional Medicare related spending. The net reductions amount to 8.48 percent of
projected trust fund costs over the 2014-2019 time period . Gross reductions amount to 17.41 percent of projected trust fund costs over the same
time period.
The JEC staff adjusted trustees’ future cost estimates for the period 2014-2083 by the 2014-2019 average savings rate of 8.48 percent. The net
cost reductions for the entire 2009-2083 period would amount to $7.3 trillion (2009 dollars).
Expressed in present value terms, the savings would be just over $2 trillion, or 15.2 percent of the HI trust fund’s present value deficit. The
staff also calculated that the date of trust fund insolvency would move from 2017 to 2019 if all net reductions were applied to the HI trust fund.
If new spending was eliminated and the gross savings applied to the HI trust fund, the gross savings over the 75-year window would amount
to approximately $15 trillion (2009 dollars). Expressed in present value terms, the reductions would amount to $4.2 trillion or 31 percent of the
HI trust fund’s present value deficit. Applying gross reductions without spending increases for new programs would move the date of trust fund
insolvency from 2017 to 2024 – seven years.
Members of Congress and the Administration would be wise to avoid using this type of budget gimmick to pay for new health care spending.
Not only does this approach hide the cost of the new spending, but it imperils the future ability of Congress and the Administration to address
the future financial problems facing Medicare. Eliminating the availability of $2 trillion in present value from future efforts to correct Medicare’s
imbalance will make the task even more daunting.
Read the analysis: Analysis
According to the 2009 Medicare Trustees’ Report, the Medicare HI trust fund faces a 75-year present value deficit of $13.4 trillion. Over the infinite
time horizon the report pegs the present value unfunded liability at $36.4 trillion.
H.R. 3200 would reduce net Medicare related spending by $214 billion over the 2010-2019 window. Gross reductions would total $499 billion
over the same period, but are offset by $285 billion in additional Medicare related spending. The net reductions amount to 8.48 percent of
projected trust fund costs over the 2014-2019 time period . Gross reductions amount to 17.41 percent of projected trust fund costs over the same
time period.
The JEC staff adjusted trustees’ future cost estimates for the period 2014-2083 by the 2014-2019 average savings rate of 8.48 percent. The net
cost reductions for the entire 2009-2083 period would amount to $7.3 trillion (2009 dollars).
Expressed in present value terms, the savings would be just over $2 trillion, or 15.2 percent of the HI trust fund’s present value deficit. The
staff also calculated that the date of trust fund insolvency would move from 2017 to 2019 if all net reductions were applied to the HI trust fund.
If new spending was eliminated and the gross savings applied to the HI trust fund, the gross savings over the 75-year window would amount
to approximately $15 trillion (2009 dollars). Expressed in present value terms, the reductions would amount to $4.2 trillion or 31 percent of the
HI trust fund’s present value deficit. Applying gross reductions without spending increases for new programs would move the date of trust fund
insolvency from 2017 to 2024 – seven years.
