The ugly math of Medicare

House Budget Chairman Paul Ryan’s 2012 budget resolution turned the floodlights on Medicare, the health care program for seniors that is projected to take increasingly bigger bites out of the federal budget in the coming decades.

Ryan’s proposals for overhauling the program are dramatic. Democrats claim they will dismantle it. Ryan claims they will save it.

Love or hate his ideas, though, they are sparking a necessary debate. The ugly math suggests Medicare is unsustainable in its current form.

Medicare is financed through a combination of payroll taxes, premiums and general revenue. The problem is that spending has been growing faster than the economy and is projected to do so indefinitely.

The reasons for that are simple: The number of people expected to enroll in the program will surge as the population ages and health care costs continue to grow far faster than inflation.

In just the next decade, the Congressional Budget Office estimates, enrollment in Medicare will grow by a third and spending per enrollee will jump by 50%.

Between 1975 and 2010, the number of enrollees doubled to 47 million, and the real cost per enrollee quadrupled, according to data from the Centers for Medicare and Medicaid Services, the agency that runs the program.

By 2040, Medicare will cover 88 million people and the cost will be nearly three times higher than in 2010.

Not surprisingly, payroll tax revenue and premiums aren’t keeping pace with the program’s increasing costs. And that means the draw on federal coffers will grow larger barring any policy changes.

To wit, in 1975, the program’s income from revenue and premiums covered 69% of total Medicare disbursements. In 2010, they covered 40%. By 2040, they’ll only cover 30%.

There is always more to be revealed. Hope your Thursday is productive and informative. Don’t forget to leave a word or two for us. See you all tomorrow 🙂

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