Medicare has three parts, only one of which is financed by Medicare deductions on your payroll taxes. That is Medicare Part A, which covers Hospital Inpatient Services.

Medicare part A is currently insolvent. The amount of money spent on part A exceeds the amount collected in payroll taxes. A few years ago, before baby boomers started retiring, the amount collected exceeded the amount spent, so there was a “trust fund” accumulation called the Medicare HI trust fund.

Naturally there is no money in this fund, it was all spent for other stuff and the only “assets” in the fund is a bunch of IOU’s from the Federal government. They now have to pay back those IOU’s by borrowing from someone else, but even if all of the money was really there, the HI fund will be depleted in ten years.

In 2019 the HI fund is projected to be exhausted an collections will only amount to 78% of expenditures. From there it gets worse. Over the next 75 years either payroll taxes will have to more than double or benefits cut in half (or some balance of the two) to pay for these promises.

That is part A, but what about parts B (doctor’s visits) and D (prescription drug coverage)? Those are funded by a combination of premiums (in the case of part D) and general revenues. Did you realize that much of Medicare is funded by general revenues, or did you think that your payroll deduction covered it? Sorry Charlie, those payroll taxes are not even close to covering it. General revenues currently pay for about half of medicare spending, and it is projected to get worse.

Medicare only looks like a good deal because we are enjoying it but we haven’t paid for it yet!

A few years ago, about one of every six Federal revenue dollars went to Medicare. In forty years, assuming federal taxes stay proportional, it will consume one of every two dollars! That does not even count Social Security, which is a model of stability by comparison.

The reason Medicare looks so good compared to private insurance is that private insurance is run by grown-ups who are responsible enough to make sure the services they provide are sustainable. Congress is not so responsible, or ethical.

Hasn’t that been obvious for years?

Sounds to me like I need to cancel my subscription to Arkansas Business.

And while I’m at it – Why has AB gone 50+ plus pages a few years ago to 26 in the last issue?