Progressives are still trying to get West Virginia Sen. Joe Manchin to support a partisan tax and spending bill. How rude of Medicare and Social Security administrators to interrupt this serenade with a reminder last week that entitlements are going bankrupt.
The bright side of the 2022 Medicare Trustees report is that the hospital insurance fund is expected to remain solvent through 2028, two years longer than forecast last year. “This is encouraging news,” said Texas Democratic Representative Lloyd Doggett. Alas, one of the main reasons is that Covid has killed many elderly people with health conditions that are expensive to treat.
Receipts from social security contributions that feed into the hospital fund have also increased due to a dynamic recovery and faster wage growth. This shows how stronger economic growth can help ease the country’s social rights burden. But administrators still expect the hospital fund to run deficits of $530 billion over the next decade, with spending exceeding tax revenue.
That’s probably an optimistic scenario. The report notes that payments to providers aren’t expected to keep pace with physician costs, so Congress will likely have to increase them to ensure seniors don’t lose access to care. Over the past two decades, Congress has repeatedly prevented vendor payment cuts.
Democrats blame Big Pharma for bankrupting Medicare, but annual Part D prescription drug costs have risen an average of 1% over the past five years. That’s far less than inflation, GDP, and other Medicare spending. Even expensive drugs that increase short-term expenditures can reduce long-term health expenditures.
Consider hepatitis C treatments, which public health rebukes called overpriced when first introduced nearly a decade ago. Prices have since dropped 75% from around $100,000 per course thanks to market competition. An analysis by the Department of Health and Human Services estimates that the treatments reduce patient healthcare costs by about $16,000 a year and will save Medicaid $12 billion after this year.
Once the hospital trust fund is depleted, expenditures will need to be reduced by 10%. The Democratic solution is to let Medicare “negotiate” drug prices — their euphemism for price controls. But it will reduce the incentive to develop innovative treatments for hard-to-treat diseases like Alzheimer’s disease. The result may be increased Medicare spending in the long run.
The news from the Trustees report on Social Security isn’t much better. The program is expected to exhaust its reserves by 2035, when all retirees will face an automatic 20% benefit reduction. The Committee for a Responsible Federal Budget notes that the benefit cuts or tax increases needed to keep the two trust funds solvent will be less if Congress acts sooner.
But these days, rights reform is taboo in Washington. Even Republicans are loath to propose phasing in the Medicare age to 67 or means-tested Social Security benefits, and progressives want to expand benefits from both programs.
Democrats are trying to convince Mr. Manchin to raise taxes to fund the welfare of green energy companies and watered-down Affordable Care Act subsidies. The point for Congress is that you don’t buy a Ferrari when you can’t afford to fix your leaky roof.
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