Bad Economy Means Medicare Will Run Out Of Cash Sooner

The latest financial checkup for Medicare finds the health program for the elderly and disabled won't be able to pay for all benefits due starting in 2024.

The insolvency date for Medicare comes five years sooner than the estimate in last year's annual report by its trustees. A crummy economy shoulders a lot of the blame for the deterioration.

Health and Human Services Secretary Kathleen Sebelius said at a media briefing that the outlook would have been worse without savings due to changes contained in the federal law overhauling health care.

Still, the looming cash crunch underscores the need for action. At the same briefing, economist Robert Reischauer, one of two public trustees for Social Security and Medicare, declared, "Under current law these vitally important programs are on unsustainable paths." He urged that steps be taken sooner rather than later to shore up Medicare.

The focus of the report and projections is on Medicare's so-called hospital fund, which covers care provided in hospitals, at home, in skilled nursing facility, and in hospices. Other parts of Medicare — for doctor visits, outpatient care and prescription drugs — get a mix of funding from general tax revenue and premiums paid by beneficiaries.

The report says that tax income and other revenue for the bellwether hospital fund "are expected to fall short of ... expenditures in all future years." Even though the Affordable Care Act does reduce the shortfall quite a bit, the Medicare trust fund for hospital care "still does not meet the short-range test of financial adequacy."

Last year, Medicare paid out $516 billion in benefits. Program income was $486 billion. And, in case you were wondering, 47.5 million people were covered by Medicare.

For the gory financial details, you can find the 2011 report by the trustees here.

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