Medicare trustees sound alarm, but progressives press ahead with irresponsible Medicare expansion

The ambitions of progressives in Congress to dramatically grow the federal government may be running into a reality check. In a recent Wall Street Journal op-ed, Sen. Joe Manchin (D-W.Va.) announced his opposition to Sen. Bernie Sanders’s (I-Vt.) budget blowout. After pointing out that Congress has already spent more than $5 trillion on COVID-19 and that the nation’s debt is nearing $29 trillion, Manchin writes:

“Now Democratic congressional leaders propose to pass the largest single spending bill in history with no regard to rising inflation, crippling debt or the inevitability of future crises. Ignoring the fiscal consequences of our policy choices will create a disastrous future for the next generation of Americans.”

While Manchin’s op-ed has attracted much attention, an important report just issued by the trustees of the Medicare program should throw more cold water on the Democrats’ spending plans, particularly regarding Medicare.  

Democrats are proposing both lowering the age of Medicare to 60 and adding a dental, vision and hearing benefit to standard Medicare. The latter expansion could cost $60 billion a year even though most seniors already have access to dental, vision and hearing benefits (in many cases at no extra cost) if they enroll in a Medicare Advantage plan. 

Every year, the trustees issue a report on the financial condition of the Medicare program. The trustees – the secretaries of the departments of Labor, Health and Human Services and the Treasury as well as the administrator of the Centers for Medicare and Medicaid Services – are key Biden administration appointees. 

The trustees reported that program spending continues to escalate. Revenue from payroll taxes and beneficiary premiums is far short of expenses, so an increasing burden is placed on general tax revenue. The Medicare Part A trust fund, which pays for hospital care, is scheduled to be bankrupt in 2026.

If that happens, providers will face a 9 percent cut in payments. Such action threatens the access of seniors on the program. Because general tax revenue is far less than needed to fund Medicare benefits, the program significantly contributes to federal budget deficits and the exploding national debt.

Medicare Part A is largely financed by payroll taxes. And most seniors pay some premiums for Part B (physician coverage) and Part D (prescription drug coverage). Medicare Advantage (Part C) provides comprehensive health coverage and includes some premium payment from beneficiaries as well. But payroll taxes and premiums do not come anywhere close to covering the costs of the program. 

The truth about Medicare is that politicians have made promises they cannot keep. The program is unsustainable and increasingly unsound, as the ratio of workers to beneficiaries continues to decline.  

The Medicare trustees’ report, put out entirely by Biden administration officials, is chock full of more bad news like this: “Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Medicare is in such dire straits that the trustees also issued an official funding warning for the program. This warning triggers action from President Biden, who must now submit proposals in early 2022 to address Medicare’s financial calamity. 

Responsible policymakers would put the program on a sustainable trajectory so it can meet the needs of those seniors and near seniors who are relying upon it. Responsible policymakers would not make more commitments that hasten the program’s bankruptcy and harm national productivity. 

Unfortunately, Democrats are racing to expand Medicare, with minimal debate or regard to long-run consequences. It turns out that many politicians would rather increase dependency on the government than grapple with the already unsustainable promises that past politicians have made that threaten our future national prosperity. 

If President Biden were serious about addressing Medicare’s gaping funding shortfalls, he would call on Democrats and Republicans to come together to enact serious reform, preserve the program for seniors and put it on a sustainable footing so its finances are fair for workers and younger Americans. 

Brian Blase was a special assistant to President Trump at the National Economic Council, 2017-19. He is president of Blase Policy Strategies. He authored research on the benefits of health care price transparency for the Galen Institute in 2019.