Why Medicare Must Be Reformed

Medicare is shaping up to be a deciding factor in the debate over our nation’s future.

As Heritage’s Bob Moffit and Alyene Senger explain in a recent paper, “Why Traditional Medicare Must (and Will) Be Reformed,” the status quo in Medicare is unsustainable and unacceptable due to the program’s structural and financing flaws.

Here are a few reasons Medicare needs to be reformed:

Medicare spending is growing faster than any other federal program. Medicare spending has reached unsustainable levels and is contributing to our budget deficits more quickly than any other program. Further, over the long term, Medicare has made $37 trillion worth of benefit promises to future seniors that are simply not funded. The hospital insurance trust fund is projected to be insolvent by 2024.
While seniors have paid for their benefits, their payments do not cover the costs of the program. In 2011, approximately 88 percent of Medicare’s spending was funded by taxpayers. A large part of the problem is the erroneous belief that seniors have fully paid for their benefits. In fact, Moffit and Senger explain that, “on average, a one-earner couple who retired at age 65 in 2011 and earned an average wage will have paid just $60,000 into the program but will receive an estimated $357,000 worth of benefits.”
Medicare enrollment is set to skyrocket. Baby boomers have already begun to retire. At the current rate of retirement, the program will enroll 10,000 beneficiaries into Medicare every day from 2011 to 2030. Moffit and Senger explain that “enrollment is expected to jump from 48 million beneficiaries in 2011 to 81 million by 2030.” This is coupled with a 50 percent decrease in the proportion of workers contributing to the hospital insurance trust fund over the same period. The outlook: more beneficiaries and fewer workers paying taxes to support them.



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