Congressman Jim Moran's News Commentary

Can the Baby Boom generation--my generation--count on receiving the benefits of the Medicare program that they have been paying into since the 1960s? And more importantly, will future generations of Americans get Medicare benefits when they retire?

From the Medicare trustees' 2004 annual report, the answer seems to be a resounding no. Last year, the trustees predicted Medicare's insolvency by 2026. This year they predict Medicare will go broke by 2019 - seven years earlier.

The trustees said Medicare will grow much faster than the economy as it increases from the current 2.6 percent of the nation's Gross Domestic Product (GDP) to 3.7 percent by 2010 and - if the program can still remain solvent - 14 percent of GDP by 2079 when our children and grandchildren will need the program.

Medicare is in only slightly worse shape than Social Security. The Social Security trustees expect the old age pension program to go bankrupt by 2042, so there is at least some more time for policymakers to make changes to Social Security to ensure its solvency and make sure benefits are not cut.

This means that in order to keep paying benefits to both Social Security and Medicare beneficiaries, we will have to raise Social Security and Medicare payroll taxes by more than 50 percent or cut benefits by one-third.

According to the General Accounting Office, even if we cut benefits and increase payroll taxes, we will still see all of the federal budget consumed by spending on these two mandatory programs plus interest on the debt within 30 years. We will also have to pay trillions of dollars on the interest for the money we are borrowing without any hope of ever being able to pay off the principal.

The GAO's Director, David Walker, even puts a price tag of $124,000 that every man, woman, and child today owes on the national debt. This calculation comes from counting up the current $7 trillion in national debt, another $2.9 trillion in intergovernmental debt, and unfunded liabilities over the next 75 years from Social Security and Medicare.

As part of their recent report, trustees of the two entitlements stated that Medicare will have $27.7 trillion in unfunded liabilities (of which, $8 trillion is attributable to the new Medicare prescription drug law), while Social Security will have $3.7 trillion. This discrepancy is due to increasingly rising costs of health care and more money flowing into the Social Security system, giving it a longer time horizon before it starts running deficits.

What is causing Medicare to go broke and to go broke so quickly?

There are some logical reasons why Medicare is going bust. The first and most obvious is that people are living longer and need more health care as they age. There are now 35.6 million Americans age 65 and over. And by 2030, when the 76 million Baby Boomers have fully retired, there will be 71.5 million Americans who are age 65 and over, i.e. twice the number of today's retirees.

But what is most startling is that the number of Americans who are 85 and older will balloon from today's 4.6 million Americans to 9.6 million in 2030. Each of these back much more in financial and medical benefits than they will have contributed to the system.

The number of older Americans and those living longer, healthier lives is due to the great strides we have made in medical care, through Medicare, and the availability of prescription drugs for those who can afford them. The Congress tried to make drugs more affordable for all seniors by providing Medicare recipients with a prescription drug benefit.

But when the Republican-version of the Medicare prescription drug bill was rammed through the House of Representatives last year and later signed by President Bush it set off a definition of what we know as Medicare and is contributing to its insolvency.

Not only will the prescription drug benefit cost $8 trillion over the next 75 years largely because the government won't be able to negotiate lower prescription drug prices, but the "reforms" made to Medicare make it compete with the private sector.

While some competition among the government and the private sector can be a good thing, this privatization scheme will ultimately work to the disadvantage of the older, sicker, and poorer.

The new Medicare law allows HMOs and other private insurers to "cherry pick" the youngest and healthiest senior citizens, while leaving the poor and sick with the publicly run Medicare. What will eventually happen is that Medicare will become more like Medicaid, a program targeted for the lowest income welfare recipients.

The Medicare trustees paint a bleak picture of our national senior citizen's health program. We should heed their warnings by rolling back the tax cuts for the wealthiest Americans to help shore up both Medicare and Social Security. President Bush's tax cuts, which if made permanent, could provide more than $14.2 trillion over the next 75 years to shore up Social Security and Medicare. But we should also work to make true reforms to Medicare so that it does not turn into a program for poor seniors, but instead stays true to its purpose: To provide quality medical care to all of America's elderly population so that they can all live longer and healthier lives.