Medicare and Social Security Trustee Reports

Here is some analysis of these reports. A few things I found interesting

  • I have always understood the "trust funds" for these programs were a crock, that we had spent the money in these funds years ago.  But the accounting fiction is important for a reason I did not know - when the trust fund is used up from an accounting standpoint  (vs. a cash standpoint, where it is not only already used up but never existed) in 2036 or whenever, statutory authority for spending is capped at annual tax collections, which at that point will be way, way below programmed spending levels.
  • Medicare alone is projected to grow to 6% of GDP.  wow.
  • The reality of Obamacare's promises of cost reductions is starting to appear, as already these supposed cost reductions are being discounted by folks who have accountability for getting the numbers right.

One thing to note -- Social Security actually has some shot at being repaired, because benefits are a fixed, predictable amount (as long as your actuarial tables are right).  Medicare and Medicaid are far harder, because the benefits are open ended, and every recent "fix" has tended to shift incentives to encourage rather than discourage more spending.  Note, for an example, the political pressure to eliminate the part D donut hole that actually is there to provide incentives to camp drug spending and prices.


  1. Ironman:

    Closely related: Who's going to be on the losing end of the benefits crunch when the trust funds are depleted?

  2. Ted Rado:

    As a retiree, I have a strong interest in Social Security and Medicare. It is clear that merely yelling "I want mine" will get us nowhere. I am quite prepared to accept a diminution of my benefits. Stopping COLA adjustments for ten years or so would reduce SS by about 30%, which is the reported shortfall. Increasing fees and copays would reduce the medicare shortfall also. Any rational person could dream up other schemes to cope with the problem. I am sure there are lots of other "Oldies" who are realistic enough to accept these needed adjustments. The politicians seem to feel that we will rebel if anyone touches our benefits. Wrong!! We will rebel if nobody in Washington has the cojones to tackle the problem. All we need is some leadership, rather than politicains saying "you are throwing grandma under the bus" whenever a change in the system is proposed. What childish nonsense!

  3. Dr. T:

    Since we cannot predict medical advances related to longevity, it is impossible to ensure that "actuarial tables are right." Politicians and bureaucrats consistently underestimate future costs of programs. Thus, I believe that Social Security also will go broke.

    My wife and I, soon after we got married twenty-five years ago, made financial plans for retirement. The first assumption we made is that we would receive no Social Security or Medicare benefits. Either the programs would be bankrupt, or they would implement means testing and pay nothing to those of us who put lots of money into IRAs. We both will start collecting Social Security benefits at age 62 (6 and 7 years from now) because we expect Social Security to fail before we're 75.

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