Medicare, Medicaid Could Have Negative Implications for Federal Budget
The Christian Science Monitor on Tuesday examined how some experts have raised concerns that Medicare, Medicaid and Social Security might represent a "fiscal time bomb" for the U.S. and that large "tax hikes and benefit cuts may be needed" to address the issue. For example, recent reductions to Medicare spending approved by Congress are "a drop in the bucket" compared with the cost of the new prescription drug benefit, and program trustees have estimated that the Medicare trust fund will become insolvent by 2020, the Monitor reports.
In addition, the Congressional Budget Office has estimated that Medicare, Medicaid, Social Security and interest on the national debt could account for half of the U.S. gross domestic product by 2050.
According to the Monitor, the "nub of the challenge is the confluence of three long-term trends: People are living longer, health care costs keep rising and the government has promised to pay much of the tab for retirees."
Kent Smetters, a professor of risk management at the University of Pennsylvania, and Jagadeesh Gokhale of the Cato Institute estimated the current "fiscal imbalance" of the federal government -- based on all estimated future spending and income -- at about $65 trillion. They added that Medicare and Social Security taxes would have to double immediately to eliminate the deficit.
However, according to the Monitor, "forecasting is an inexact science," and many factors, such as birth rates and the health of seniors, will "influence the fiscal situation over coming decades" (Trumbull, Christian Science Monitor, 1/10).