by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Former Congressional Budget Office director Douglas Holtz-Eakin and former Office of Management and Budget director Jim Nussle warn National Review Online readers this morning about Medicare‘s “dirty little secret.”
It’s something everyone knows, but no one wants to talk about: Medicare’s cash position makes Enron’s business model look downright reputable.
Medicare is bleeding cash — a fact disguised by creative accounting. According to Monday’s release of the 2012 Trustees Report, in 2011 Medicare took in $260.8 billion in payroll taxes and beneficiary premiums, but spent $549.1 billion in medical services. That means last year Medicare ran a $288.3 billion cash shortfall.
And 2011 wasn’t the exception; it was the norm. Since President Lyndon Baines Johnson secured passage of Medicare legislation in 1965, the program has run cash deficits every year except 1966 and 1974.
Advocates of the status quo argue that Medicare receives “general revenue transfers,” but that’s government-speak for raiding the Treasury to spend other tax revenues. It’s the dramatic use of general-revenue transfers that has hidden Medicare’s true insolvency from the public and masked Medicare’s contribution to the national debt.
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.