Fact Check: Medicare Is Already Functionally Insolvent

[Kamaji]

Fact Check: Medicare Is Already Functionally Insolvent

Politicians have been hiding the hard facts of Medicare for decades, and the American people will not like it when they learn the truth.

BY: CHRISTOPHER JACOBS
JUNE 10, 2022

The recently released Medicare trustees report estimates the program’s Part A trust fund faces insolvency in 2028, two years later than last year’s estimate. Some might think that represents a major improvement in the program’s fiscal position. But a fact-checker—at least a politically honest one—might say the 2028 projection lacks important context.

In reality, Medicare faces a series of financial challenges, many of them created by fiscal gimmicks, that make the program’s shortfalls much greater than the “official” estimates suggest. Politicians have been hiding the hard facts about Medicare for decades, and when they finally have to face the fiscal music—which will happen sooner rather than later—the American people will not like what they hear.

Obamacare Double-Counting
In truth, Medicare’s trust fund is already insolvent, and has been for several years. In 2009, the last year before Obamacare’s passage, the program’s actuaries estimated trust fund insolvency in 2017—five years ago. But suddenly, the year that Obamacare passed, the insolvency date got extended until 2029. What happened?

As some might recall, Obamacare lowered Medicare spending by $718 billion and raised several Medicare-related taxes. What happened with that money is such a Washington politician’s gimmick that the politicians deserve to explain it themselves:

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Source:  https://thefederalist.com/2022/06/10/fact-check-medicare-is-already-functionally-insolvent/

[Hoodat]

So is Social Security.

[Kamaji]

So is Social Security.

Reason Magazine:  Social Security Is Running Toward Insolvency

[Hoodat]

Reason Magazine:  Social Security Is Running Toward Insolvency

Social Security already is insolvent.  It has been insolvent for a decade now.  The so-called 'solvency' that the article above claims is based on assets that do not exist.  The fact is that more money is paid out to recipients (30% of which are below retirement age) than is collected from workers in taxes.  This requires tax revenues from the general fund to be diverted to Social Security to make up the difference.

[Kamaji]

Social Security already is insolvent.  It has been insolvent for a decade now.  The so-called 'solvency' that the article above claims is based on assets that do not exist.  The fact is that more money is paid out to recipients (30% of which are below retirement age) than is collected from workers in taxes.  This requires tax revenues from the general fund to be diverted to Social Security to make up the difference.

What requires funds to be diverted from general revenues is the fact that the prior excess revenues from the social security income surtax were not set aside, but were instead "lent" - cute use of that word, btw - to the federal government for general expenditures.  As a result, the only way to recover the "invested" - also a cute use of that word, btw - funds is to expend general revenues from the normal income tax (and other federal sources of revenue).

Had those prior-year excess revenues in fact been invested, then liquidating the investment to cover the excess benefits now would not have required dipping into general revenues.

It's all, at bottom, a glorified Ponzi scheme that would have made both Bernie Madoff, and ole Charles Ponzi himself, proud.

That being said, even if the prior-year excess revenues had been invested, rather than spent by the federal government itself, the program would, on its current trajectory, become insolvent sooner or later.