Recently by Gary North: Why Bernanke Is in Panic Mode
This is taken from a March 25, 2008 press release from the U.S. government’s Department of Health and Human Services.
This year the HI Trust Fund will spend more than its income, and from 2009 through 2017, about $342 billion will need to be transferred from the Federal treasury to cover beneficiaries’ hospital insurance costs.
Was this front-page news? Of course not. Did the media cover this up? In the sense of not reporting it, yes. In the sense of actively comprehending it and deliberately suppressing it, no.
The one-sentence admission indicated that the Federal deficit is going to climb. Medicare is politically untouchable. Old people have been promised coverage, and no politician is going to tell granny she must fork over her life’s savings to pay for her own health care expenses. Not yet, anyway. Not this year.
But what about the famous Medicare trust fund? Whenever we read about Medicare’s projected deficit, it always refers to Medicare’s trust fund. It never says this: “Medicare’s trust fund is 100% filled with unmarketable IOUs from the U.S. Treasury.” Yet that is the situation. Medicare’s trust fund is just like Social Security’s.
You may think, “North, you are exaggerating. It can’t be this bad.” Well, if I’m exaggerating, it’s because I believe the Board of Trustees of Social Security and Medicare. I think you should, too.
In a little-noticed official report, A SUMMARY OF THE 2009 ANNUAL REPORTS Social Security and Medicare Boards of Trustees, the public is presented with the truth. The truth is not expressed in stark language. The truth is too shocking. Bureaucrats cover up shocking truths with bureaucratese. But they are required by law to tell the truth, statistically speaking.
Let me take you through the highlights.
As was true in 2008, Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures this year than it receives in taxes and other dedicated revenues. The difference will be made up by redeeming trust fund assets.
Truth: Expenditures will exceed revenues in 2009. They did in 2008, too. The phrase, “reducing trust fund assets” means “raiding the cookie jar.”
Then comes the initial cover-up: no mention of the nature of the assets in the trust fund. What is said about reducing trust fund assets is true. What is not said is far more significant.
Growing annual deficits are projected to exhaust HI reserves in 2017, after which the percentage of scheduled benefits payable from tax income would decline from 81 percent in 2017 to about 50 percent in 2035 and 30 percent in 2080.
That seems to indicate that we have time before the cookie jar is empty: until 2017. We don’t. Here’s why.
In addition, the Medicare Supplementary Medical Insurance (SMI) Trust Fund that pays for physician services and the prescription drug benefit will continue to require general revenue financing and charges on beneficiaries that grow substantially faster than the economy and beneficiary incomes over time.
August 8, 2009
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.
Copyright © 2009 Gary North
