The annual release of the Medicare Trustees report offers a fleeting moment for adult conversations among policymakers about the program’s long-term trajectory. We must take advantage of this year’s moment and come to a bipartisan understanding that the Medicare program needs structural reform and not just nibbling around the edges.
To illustrate why structural reform is needed, consider what it would have taken to have had a positive Medicare cash-flow balance in 2011:
For Medicare Part A (hospitals), the cash deficit was $61 billion. To balance this deficit, payroll taxes on employers and workers would have to have been increased by 31 percent.
For Medicare Part B (physicians), the cash shortfall was $168 billion. To balance this deficit, seniors’ physician premiums would need to increase by 392 percent, meaning the annual physician premium cost to seniors would have risen from $1,198 to $4,687 — an increase of $3,499.
For Medicare Part D (drugs), the cash shortfall was over $59 billion. To balance this deficit, seniors’ premiums for prescription drugs would need to increase by 871 percent, meaning the annual drug-premium cost to seniors would rise from $372 to $3,250 — an increase of $2,878.