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Saturday, February 11, 2017

Saturday Afternoon Reading -- Insolvency is Over (If You Want It)

This isn't a new article; it was written back in July. But I wanted to link to it for posterity, and it's worth reading. All the talk we hear from conservatives (and an awful lot of liberals) about Medicare going "bankrupt" is way overblown. Only one part of Medicare, the part that covers hospitalization, can structurally even have a chance of running out of funds, and even that is projected to have just a slight shortfall by 2028:

The 2016 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 2028.  Even in 2028, when the HI trust fund is projected for exhaustion, incoming payroll taxes and other revenue will still be sufficient to pay 87 percent of Medicare hospital insurance costs.[1]  The share of costs covered by dedicated revenues will decline slowly to 79 percent in 2040 and then rise gradually to 86 percent in 2090.  This shortfall will need to be closed through raising revenues, slowing the growth in costs, or most likely both.  But the Medicare hospital insurance program will not run out of all financial resources and cease to operate after 2028, as the “bankruptcy” term may suggest.
The 2028 date does not apply to Medicare coverage for physician and outpatient costs or to the Medicare prescription drug benefit; these parts of Medicare do not face insolvency and cannot run short of funds.

The Hospital Insurance will only need slight tweaks to stay solvent for 75 years (which on these timelines is forever because factors change over time):

And the HI program’s projected 75-year shortfall of 0.73 percent of taxable payroll is much less than the 3.88 percent of payroll that the trustees estimated before health reform.  (See Figure 1.)  This means that Congress could close the projected funding gap by raising the Medicare payroll tax — now 1.45 percent each for employers and employees — to about 1.8 percent, or by enacting an equivalent mix of program cuts and tax increases. 

So, assuming for a lousy $35 for every $10,000 you make, plus lifting the Social Security tax cap to apply to those making $250K or more per year, we would  not have to worry one iota about those crucial parts of the American safety net for the rest of the century.

As I've been saying for at least a decade, the biggest threat to Social Security and Medicare isn't insolvency, it's the Republican Party. A month ago, I was positive they'd be able to gut it over the next couple of years. But I also said, probably on this site, that our best hope is the apparent inability of the Republicans in the House to walk and chew gum at the same time; i.e., work on issues in parallel. If the Dems can take the House in 2018 (and I'm going to do everything, however little or much I can, to ensure that), the Republicans really only have 22 months or so to really puncture the safety net, and they're having issues getting their act together. If they can't do Obamacare, and that's looking less and less likely (though still a frightening possibility), they won't have the time or the political capital for Medicare, Social Security, and Medicaid.

If (and that's a big, but not impossible, if) Speaker Pelosi takes back the gavel in 2018, not only do Dems get to dictate the legislative agenda in the House, we can totally jam up the works by spending two years working to impeach the President. We won't be able to convict, because the odds of regaining the Senate, particularly the 2/3s we'd need, are nil, but we keep a lot of things from happening while not losing much in the way of popularity going forward, barring something unforeseen.

Repeating what I said the other day, if Trump and the rest of the Republicans could shut their mouths and not say or do anything stupid for a couple of months, they could achieve their ultimate goal of reducing the entire earth to a smouldering ruin. But they don't seem to be able to do that for more than a few minutes. That's not to say that we should be in any way optimistic. We just may escape from this shitstorm with the general structure of our country still standing.

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