Neglect Poses a Major Risk to Medicare and the Federal Budget

Nearly 15 years ago, Barack Obama tried to sell Obamacare by attempting to raise alarms about what would happen to our health care system “if we do nothing.” A decade and a half on, no thanks to Obama’s health care law, “nothing” is what is happening regarding some of the biggest fiscal problems our nation faces.

Obamacare didn’t solve the fiscal problems associated with the retirement of the Baby Boom generation — on the contrary, in fact. By allowing lawmakers and presidents to ignore those problems for going on two decades, the law delayed but did not prevent our fiscal reckoning, making it all the more painful when that day finally arrives.

Trust Fund Gimmicks

In 2009, right before the enactment of Obamacare, Medicare’s trustees reported that the program would become insolvent in 2017, eight years away. But within months after the law’s passage, the 2010 trustees report put off insolvency until 2029, a 12-year improvement. The report also reduced the unfunded obligations of the Medicare Hospital Insurance Trust Fund from $13.4 trillion to $2.4 trillion over 75 years — a more than 82 percent reduction in unfunded obligations.

Did Obamacare suddenly improve Medicare’s finances by such dramatic leaps and bounds? In a word, no. Every dollar that supposedly extended the life of the Medicare trust fund was also used to pay for Obamacare, as then-Secretary of Health and Human Services Kathleen Sebelius conceded in testimony before Congress:

Obamacare only improved Medicare’s finances on paper. In reality, the program likely became functionally insolvent years ago, meaning that only the budget gimmick allowing the same funds to count for funding Obamacare and extending the life of Medicare is keeping the latter program afloat.

That paradigm should guide readers regarding the news that the latest version of the trustees’ report has postponed Medicare’s insolvency still further, to 2036. While developments analyzed in this year’s report suggest that the program’s financial situation has improved somewhat, they also mean that politicians have a continued excuse to duck the tough choices needed to keep the program solvent over the long term.

Need for a Forcing Mechanism

Some years ago, lawmakers understood that there needed to be a mechanism to force legislative action regarding deficits and debt, or otherwise weak-kneed politicians would ignore looming problems until it became too late. Consider for instance these quotes:

• This amendment “is designed … to immediately focus our attention next year … at the most critical time attention should be focused on taking on the tough measures. And that is when you have to raise the debt ceiling again. My mother says there is nothing like looking over the precipice to focus one’s attention.”
• This amendment “will provide the incentive to act next spring. It will do so because it says we cannot increase the debt limit again until we have acted on a budget freeze.”
• “I cannot agree to vote for a full increase in the debt without any assurance that steps will be taken early next year to reduce the alarming increase in the deficits and the debt.”

Those quotes come from none other than Sen. Joe Biden, speaking nearly two score years ago. In a Senate debate on raising the debt limit in the fall of 1984, Biden supported an amendment that would have forced Congress to act on freezing all federal spending (yes, including Social Security and Medicare). When the Senate failed to approve the amendment, Biden voted against raising the debt limit because it did not control Medicare and Social Security spending.

The Biden of 1984 understood that lawmakers needed to hold their own feet to the fire and avoid ducking the tough fiscal issues. Unfortunately, four decades later, Biden has forgotten (or wants to forget) his own personal history and is using Obamacare’s fiscal gimmicks, which masked but did not solve Medicare’s shortfalls, as one reason to avoid making hard choices.

Of course, Medicare and Social Security do not represent the only reasons for the mess our nation faces. Trillions of dollars in spending on welfare benefits and outright fraud during the Covid pandemic did nothing to help our fiscal situation, particularly because rising interest rates have led to a spiral in the amount our nation has to pay to service our own debt.

But no comprehensive solution to our fiscal woes can avoid tackling Medicare and Social Security. And the more politicians use gimmicks and budgetary sleight-of-hand to delay confronting the obvious, the worse shape our children and grandchildren will be.