MEDICARE'S FISCAL RUIN.

• Author: Suderman, Peter
• Position: ECONOMICS

THE MOST RECENT annual report on the fiscal health of Medicare from the program's trustees wasn't much of a surprise. But it was yet another warning of the program's looming fiscal ruin.

Like the 2020 edition, the 2021 Medicare Trustees Report estimated that Medicare's hospital insurance trust fund will be insolvent in 2026. At that point, the fund will have to rely on incoming revenues, essentially operating on a cash-flow basis--and there won't be enough cash.

In 2026, the hospital insurance fund will be able to cover only about 91 percent of its bills. In the years that follow, that gap will grow only larger. Without changes to the program's financing, doctors, hospitals, and other medical providers will face rapidly reduced payments from the program. This will have ripple effects on the provision and availability of health care and on the wider American economy, roughly a sixth of which revolves around health care services.

The report also provided reason to suspect that Medicare's fiscal problems may be even worse than the headline numbers suggest: The fiscal forecast assumes that an array of cost-reduction measures, including a series of caps on Medicare physician payments and bonuses, will persist. But the trustees noted that Medicare's "long-range costs could be substantially higher than shown throughout much of the report if the cost-reduction measures prove problematic and new legislation scales them back."

The report seemed to generate little concern on Capitol Hill. It was released at the end of August, as Democrats in Congress were pursuing two massive, interlocked spending packages: a bipartisan $1.2 trillion infrastructure bill (about $550 billion of which constituted "new" spending) and a partisan spending bill focused on climate and welfare programs that was initially priced around $3.5 trillion.

That second bill has faced downward pressure from moderate Democrats in the Senate. But one provision supported by both President Joe Biden and progressives in Congress is the expansion of Medicare benefits, adding dental, hearing, and vision coverage to the program. In 2019, the Congressional Budget Office put the price of a similar proposal at $358 billion over a decade. (A later version of the package priced at $1.85 trillion proposed hearing coverage only.)

Progressive Democrats, of course, have long looked for ways to expand Medicare...