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We Can’t Ignore Medicare’s Financial Woes

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Joe Albanese
Senior Policy AnalystatParagon Health Institute

Joe Albanese is a Senior Policy Analyst with Paragon Health Institute. He comes to Paragon with over six years of federal and nonprofit public policy experience.

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The annual Medicare trustees’ report, released on Monday, is bringing Medicare back into focus in Washington. The media’s focus is on the fact that Medicare’s Part A trust fund is projected to become insolvent in 2036, compared to 2031 from last year’s estimates. While this change is welcome news, the main takeaway from the report should be that Medicare represents the most significant fiscal challenge for the federal government. In fact, the trustees issued their seventh consecutive “funding warning,” an indication that the program is overly reliant on general-revenue transfers. Over the next decade, Medicare’s real cost is projected to expand by over a third — from 3.8 percent of the economy in 2024 to 5.1 percent in 2033.

Insolvency Date Is Important, but Not the Best Measure of Medicare’s Financial Challenges
The Part A insolvency date is the year when the trustees expect Medicare’s hospital-insurance trust fund to be depleted. This account pays for Medicare’s inpatient hospital and post-acute care benefits. It is almost entirely financed by payroll-tax revenue from current workers. When its excess balances run out, Medicare will by law only be able to pay out as much as it takes in.

The full article can be found in National Review.

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