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http://www.cbpp.org/cms/index.cfm?fa=view&id=3532Claims by some policymakers that the Medicare program is nearing “bankruptcy” are misleading. Although Medicare faces major financing challenges, the program is not on the verge of bankruptcy or ceasing to operate. Such charges represent misunderstanding (or misrepresentation) of Medicare’s finances.
Medicare’s financing challenges would be significantly greater without the health reform law (the Affordable Care Act, or ACA), which substantially improved the program’s financial outlook. Repealing the Affordable Care Act, a course of action promoted by some who simultaneously claim that the program is approaching “bankruptcy,” would make Medicare’s financial situation much worse.
The 2011 report of Medicare’s trustees finds that Medicare’s Hospital Insurance (HI) trust fund will remain solvent — that is, able to pay 100 percent of the costs of the hospital insurance coverage that Medicare provides — through 2024; at that point, the payroll taxes and other revenue deposited in the trust fund will still be sufficient to pay 90 percent of Medicare hospital insurance costs. <1> (The Medicare hospital insurance program is considered insolvent when revenues and trust fund balances will not cover 100 percent of projected costs.) Over the next 75 years, revenue will cover an average of 83 percent of Medicare’s hospital insurance costs. This shortfall will need to be closed through the provision of additional revenues, program changes that slow the growth in costs, or most likely both. But the Medicare hospital insurance will not run out of all financial resources and cease to operate after 2024, as the “bankruptcy” term may suggest.
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