Medicare Is Not “Bankrupt” Health Reform Has Improved Program’s Financing

Source: Center on Budget and Policy Priorities

Claims by some policymakers that the Medicare program is nearing “bankruptcy” are misleading. Although Medicare faces major financing challenges, the program is not on the verge of bankruptcy or ceasing to operate. Such charges represent misunderstanding (or misrepresentation) of Medicare’s finances.

Medicare’s financing challenges would be significantly greater without the health reform law (the Affordable Care Act, or ACA), which substantially improved the program’s financial outlook. Repealing the Affordable Care Act, a course of action promoted by some who simultaneously claim that the program is approaching “bankruptcy,” would make Medicare’s financial situation much worse.

The 2011 report of Medicare’s trustees finds that Medicare’s Hospital Insurance (HI) trust fund will remain solvent — that is, able to pay 100 percent of the costs of the hospital insurance coverage that Medicare provides — through 2024; at that point, the payroll taxes and other revenue deposited in the trust fund will still be sufficient to pay 90 percent of Medicare hospital insurance costs.

The "scare" is over Parts B and D. They have no fixed funding source that's able to cover them. They're paid for largely out of general revenues. They've been drawing increasingly large quantities of money from general revenues.

But if you can only recite your alphabet up to "A," hey, everything's great. Problem is, most kindergarten students by mid-year can get at least to D.

It's a whole-part fallacy. Medicare in trouble? Nonsense, Medicare Part A is doing fine. So Medicare is doing fine.