Bankrupt in seven years

Medicare was signed into law by President Lyndon Johnson with the promise that no longer will young families see their own incomes, and their own hopes eaten away simply because they are carrying out deep moral obligations to their parents.

But as Congressman Paul Ryan recently wrote, Absent reform, the program will end up delivering exactly what it was created to avoid: it will consume the prosperity of today’s younger generation to finance an unsustainable path of spending.

The problem is that the program, which covers more than 45 million Americans, is quickly going bankrupt. One of the major causes of their fiscal imbalance has been Medicare’s inability to control costs. The CBO found that total spending per Medicare enrollee grew at 10.6% annually while the privately insured grew at 7.7%. The result of this backwards bottom line is that the trust fund is “projected to be exhausted during 2017.” That is a mere seven years from now.

Sadly most people are resigned to the fact that Medicare will eventually fail.A recently Zogby poll found that 47% of young adults believed Medicare would not be around by the time their children were eligible for benefits; another 33% were unsure.This is simply unacceptable. Moreover, it is why our generation must lead the charge to reform this broken program before it is too late.

Bankrupting State Budgets

As a federal/state partnership program Medicaid is intimately woven throughout all governmental budgets. In fact, Medicaid is the single largest expense category in state fiscal budgets.Thus, rising costs or unsustainable growth not only threatens our federal deficit but could also force states to cut back services or increase taxes. Unlike Medicare and Social Security, Medicaid is funded out of general revenues on an as-needed basis. Although this pay-as-you-go system ensures financial balance any growth in costs necessarily squeezes other parts of the budget.

The latest data from the Center for Medicare and Medicaid Services shows that the government spends $339 billion per year – up from $14 billion in 1980. This incredible growth is projected to continue. Prior to the enormous expansion of the program as a result of health care reform’s passage, CMS estimated that the cost of the program would reach $674 billion in 2017. In growing twice the rate of inflation, Medicaid’s share of the gross domestic product (GDP) was projected to reach more than 3% by 2017.

Cash strapped states are ill equipped to handle such consistent and enormous increases in their budgets. To control costs they must either cap enrollees or cut reimbursement rates. Opting for the latter option has forced more than 30% of all physicians to refuse to accept any new Medicaid patients – which often cost money to treat.

Health care reform will only make these statistics worse. Of the 32 million Americans expected to gain coverage under the law – 20 million will be insured by Medicaid. But can the federal government, and more importantly states, handle the addition to their bottom line? History tells us no.