Surprise! The government is running out of money. Most people expected that with over six trillion in spending in the last year for Covid relief and paying people to stay at home, but there are other entitlements facing bankruptcy sooner than you might expect.

Social Security and Medicare have been the “third rail “of politics for many years because so many Americans depend on these entitlements. But the latest report from the annual Social Security and Medicare Trustees should alarm everyone. The Trustees project that Medicare Part A (hospital payments) will run dry in 2026. The two Social Security trust funds for disabled individuals and seniors won’t be exhausted until 2034, but don’t count on Congress to be the first to cut their own retirement benefits to save the day.

I mentioned the impending insolvency of Medicare Part A in my last post, Expanding Medicare a Bad Idea, but today I want to elaborate on that truth.

The Medicare Trustees project that hospital spending will exceed revenue by $578 billion over the next decade and grow to 4.34% of payroll in 2031 from 3.64% this year. Social Security costs are projected to rise to 16.3% of payroll in 2031 from 14.1%. These projections could be altered by changes in labor force participation, wage growth, interest rates, inflation and healthcare utilization. Since all of these demographics are currently trending in the wrong direction, these assumptions are probably optimistic.

What will happen when the money runs out? The Wall Street Journal editorial board says the government will have to tap into the general revenue funds to pay the bill. The impact of this will be a squeeze on defense and discretionary spending and soaring taxes. Both of those responses are already being used to pay for the social welfare and climate change agenda of the Biden administration. Right now, Congress is debating cuts in defense spending and raising taxes that will weaken our national security and slow our economic recovery – and they aren’t even talking about the insolvency of Medicare and Social Security! Our allies and our enemies are watching closely as we weaken our defenses and stifle our economy. 

What other measures might be taken to stem the insolvency tide? Medicare provider and insurer payments would have to be cut by 9% when the hospital trust fund goes insolvent to bring spending in line with revenue, according to the Committee for a Responsible Federal Budget. Once the Social Security trust funds go broke, beneficiaries would face a 22% across-the-board cut.

Raising the eligibility age for Medicare would be another option – but Democrats are pushing just the opposite approach, lowering eligibility to age 60. Previous attempts to raise the eligibility age to just 67 have been unsuccessful – even when Congress was less divided.

WSJ editors say the more likely scenario will be rationing of care, which is common in government-run healthcare systems in countries like the United Kingdom, Canada, and Sweden. That means the government, not your doctor, will determine if you are eligible for a new knee replacement, a costly heart surgery, or the latest chemotherapy for your cancer diagnosis. Already many liberals are pushing back against the new Alzheimer’s drug treatment because they don’t believe the cost is justified for treating elderly patients.

I agree with the editors since the Democratic party has been pushing for socialized medicine for many years and rationing healthcare comes with every socialized system, by whatever name you choose. Vermont Senator Bernie Sanders pushed Medicare for All during his presidential campaign, but this threatened the beloved private insurance of many Americans so the party chose Joe Biden. These changes to Medicare will slowly achieve the same purpose for seniors under the guise of keeping Medicare solvent. It’s a good way to let the camel get his nose under the tent.

 

During the presidential campaign last year, all we heard about was Medicare for All. Vermont Senator Bernie Sanders proposed this idea and it was the talk of the town – until it wasn’t. Initial positive polling bottomed out when people realized it meant eliminating their private health insurance. In fact, the main reason Sanders fell from the lead in the nomination battle was because the Democratic Party realized he couldn’t win with that agenda. Joe Biden was supposed to be “the moderate” who wouldn’t take away your health insurance.

Now that Biden is president and the progressive wing of the Democratic Party is ascendant, talk of changing Medicare eligibility is back on the agenda. Former Louisiana Governor and presidential candidate, Bobby Jindal, says moderate Democrats used to promote raising the eligibility age of Medicare as a way to ensure its solvency. Today, progressives want to lower the eligibility age as a step toward a single-payer healthcare system – which is socialized medicine.

Jindal says the Democrats’ $3.5 Trillion Senate budget plan allows the final legislation to lower the eligibility age. President Biden’s budget also endorses the plan, which would cost $200 billion over 10 years and add more than 20 million younger sexagenarians to the 63 million seniors and disabled beneficiaries who already rely on the program. This is a reversal from Biden’s campaign pledge to leave Medicare alone, but expand ObamaCare by adding a “public option.” That was always a slow path to socialized medicine, but emboldened by the progressive caucus, Biden now wants a faster approach.

The Medicare Part A trust fund, which pays for hospital benefits, is already projected to be insolvent by 2026 – that was the reason “moderates” used to promote raising the eligibility age. Even without expansion Medicare spending is projected to nearly double over the next 10 years with the increasing age of the population. Jindal says Congress’s first priority should be to strengthen the program’s finances so that vulnerable seniors can continue to access life-saving health care.

Democrats make the argument that expanding Medicare is necessary to reduce the number of uninsured Americans. But lowering Medicare’s eligibility age is an inefficient way to accomplish that. Two thirds of Americans age 60 to 64 already have private coverage through an employer or the individual market. The eligibility for subsidies on the individual market were increased by the American Rescue Plan, passed by Congress earlier this year.

Moving these individuals from private coverage to Medicare will simply shift the cost from private individuals or employers to the taxpayers. Only 8% of the newly eligible population, or 1.6 million people, are currently uninsured. Two-thirds are already eligible for Medicaid or exchange subsidies, 15% have access to employer-provided coverage, and 7% are illegal aliens who are ineligible for Medicare.

This move will also lower payments to hospitals and physician providers who make up for losses on Medicare through private insurance. Shifting patients from private coverage to Medicare will negatively impact these providers. The only way for providers to recover these losses is to raise prices on the privately insured. Failing that, providers will go out of business either by bankruptcy or early retirement.

For years, employees and employers have been paying payroll taxes that support Medicare, expecting Medicare to be there to provide the healthcare they need when they reach 65. These plans by Democrats threaten that support system in the name of providing more healthcare coverage to more people, when in fact, it will provide less.