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April 24, 2007

The soft trigger has been pulled; now what?

We are so used to hearing the latest projections about when Medicare and Social Security trust funds are going to run out of money that we don't pay attention any more.  Congress and the administration don't pay attention either (if they did, things would be improving on this front instead of deteriorating), but now they have to -- it's the law!

The latest projections (Medicare: 2019, Social Security: 2041), described in today's Washington Post, result in what's known as pulling the soft trigger (under the Medicare Modernization Act).

The Post notes:

Over time, the programs are expected to consume a growing share of the federal budget. This year, about 7 percent of federal income tax revenue goes toward paying Social Security and Medicare benefits. The figure is projected to climb to more than 10 percent by 2012, and 26 percent by 2020, said economist Thomas R. Saving, a trustee.

(Great name for a trustee, eh?  I believe that's a euonym, for you linguists out there.)

To keep the programs going, Congress and the president will have to increase taxes, reduce benefits or do both, the trustees said. "Without significant reform, these programs are not sustainable in the long run," Saving said.

Trustees warned for the first time that money from general revenue will exceed 45 percent of projected Medicare expenditures in two consecutive years, 2012 and 2013. Currently 42 percent of Medicare outlays are from general revenue. The warning, mandated by a 2003 law, requires President Bush to propose ways to handle the growing costs next year and Congress to consider those proposals.

The trustees said Medicare's financial problems, fueled in part by rising health-care costs, have also been exacerbated by the new prescription drug benefit, which cost the government about $30 billion last year.

Democrats on Capitol Hill said the trustees' report shows that Medicare is a more pressing problem than Social Security and warned against making cuts that would hurt seniors.

This is clearly not a new problem, but now our leaders in Washington are required to try to do something about it.  As I've said before, I expect them to merely go through the motions and blame each other for the fine mess we're in.

Of course, if you listen to the rhetoric of the hospital industry, you may be forgiven if you believe that the proposed 2008 Medicare IPPS rule will practically bankrupt the hospital industry all by itself . . . .   

-- David Harlow


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