Baby Boomer Armageddon

The same law that gave us Medicare prescription drugs says that if Medicare's finances deteriorate sufficiently the President must propose a remedy and Congress must expedite its consideration. In releasing its annual report the other day, the Medicare Trustees announced that this financial "trigger" has been hit.

How dire are things?  Very dire.  Once the baby boomers begin to retire, the federal government will face a cash flow nightmare:

  • In just five years, the government will have to stop doing one in every ten (non-entitlement) things it has been doing in order to keep its promises to the elderly.
  • In 13 years, the government will have to stop doing one in every four things it currently does.
  • And this forecast does not even include the impact of baby boomers on Medicaid, which is almost as big as Medicare.

All of this is spelled out in a terrific editorial by Professor Thomas Saving in today's Wall Street Journal.  Read it carefully because you are unlikely to read about this problem any where else.

In its story about the Trustees Report, The New York Times mentioned the "trigger" in paragraph 14.  The Washington Post had it in paragraph 9.  In journalism, this is called burying the lead.  In lay language, it is called missing the point.

One place the point has not been missed is on The New York Times editorial page, which rarely passes up any occasion to undermine efforts to bring the facts to light.  The Times editorial writers, who apparently think the government can pay medical bills with IOUs it writes to itself, have bemoaned on several occasions about President Bush's reappointment of Saving and Syracuse University Professor John Palmer as Public Trustees of Social Security and Medicare.  These two, originally appointed by President Clinton, have made an obvious impact on Trustee reporting: the reports now include the present value of the programs' unfunded liabilities and the impact of the cash flow deficits on government finances.

The latest Times editorial lamented that there even is a trigger.  Why get distracted by cash flow deficits when the obvious solution… (after we run out of IOUs)…to this and all other financial problems is… tax the rich.

Cest la vie.

Read Dr. Saving's piece in the Wall Stree Journal

Comments (4)

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  1. Stan Alekna says:


    Keep up the great flow of info. I am using it to inform locals via op-ed pieces and letters in local papers and to educate state legilators so they will defeat Gov. Rendell’s folly of a health plan.

    Best regards,

    Stan Alekna

  2. Thomas Pauken says:

    Good article. The Medicare bankruptcy has been moved a few years closer to the present thanks to the new entitlement added to the program by the Bush administration.

  3. Bruce A. McDonald says:

    John, talk about burying news…I don’t see you talking about how much pharmaceutical companies have raised charges up to and since implementation of the Medicare Drug program, so that the ‘discount’ they now give amounted to little-to-no realized savings on many drugs; the discounts lost because the federal government refused to negotiate discounts on the drug program, although every managed care company, Medicaid and the VA do; or the savings that could be realized from eliminating the increased reimbursement passed on to insurance companies by the government in the Medicare Advantage program. May be I missed those articles. A lot of savings & efficiency could be gained by truly reforming Medicare.

  4. Sean says:

    Not every major media outlet burried the lead. See the Chicago Tribune story below:

    By William Neikirk, Tribune senior correspondent

    For the first time, President Bush and Congress were put on legal notice Monday that they will have to consider legislation to overhaul the Medicare program next year. But “consider” is a long way from “pass.”

    It happened because trustees of the health-care program for the elderly projected for the second year in a row that general taxpayer revenue would have to bear more than 45 percent of the program’s cost.Their report triggered a law passed in 2003 aimed at trying to force action on Medicare’s growing financial problem.

    As a result, Bush is required to present a plan to Congress so the 45 percent limit isn’t breached in the future. Congress is supposed to consider legislation but is under no obligation to pass it. Payroll taxes and insurance premiums also support the Medicare program.

    Politics being what they are in an election year, no final action is likely in 2008, although both political parties are expected to engage in heated debate over how to fix Medicare — and Social Security as well.

    This highly controversial 45 percent trigger was approved when Republicans controlled both houses of Congress. Now, many Democrats say it’s an arbitrary limit that could cause unfair cuts in the program. Several lobbying groups also took issue with the requirement.

    “This 45 percent threshold is completely arbitrary, but correcting this so-called ‘problem’ risks doing serious harm to Medicare beneficiaries,” said Ron Pollack of Families USA, an advocacy group. “It will undoubtedly lead to attempts to reduce benefits, increase premiums, or cap the amount Medicare will pay for premiums.”

    The trustees said the Medicare program would become insolvent by 2019, a year later than projected a year ago, and Social Security by 2041, also a year later. Trustees, led by Treasury Secretary Henry Paulson, said the projections show action must be taken swiftly.

    “We are sowing the seeds of a loss of economic prosperity,” he said.

    But Sen. Charles Schumer (D-N.Y.), chairman of the Joint Economic Committee, called the 45-percent trigger for Medicare “nothing less than another way to choke off funds to seniors who need help.”

    Schumer said the report shows there is plenty of time to deal with Social Security, but “we will have to address issues in Medicare soon.”

    The Concord Coalition, an organization that pushes fiscal responsibility by the federal government, said Democrats and Republicans have different plans but “this step demonstrates that the first step is to reject the ‘do-nothing plan.’

    Robert Bixby, its executive director, said the cost of both programs will roughly double — from 7 percent of the economy today to 14 percent by 2040. If the programs were that big today, he said, “they would consume about 80 percent of all [federal] revenues.”