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Bush Budget Speeds Medicare Insolvency by 15 Years

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Publication Date: March 2001

Publisher(s): Families USA

Topic: Health (Health services for older people)

Type: Report


In the highlights of his Budget Blueprint to the Congress, President Bush contends that the budget "spends every penny of Medicare tax and premium collections over [the] next 10 years only on Medicare." Shortly thereafter, the President's Message states: The President's Budget reserves all Medicare funds for Medicare. These statements are very misleading. As the following analysis shows, the President's budget would divert $526 billion over the next 10 years from the Medicare Hospital Insurance Trust Fund (Medicare Part A), which is funded by dedicated payroll taxes, and use it to cover a portion of Medicare physician and outpatient services (Medicare Part B). Since Medicare Part B is, by law, mostly funded through general revenues, this frees up $526 billion in general revenues to pay for other items in the budget, such as approximately one-third of President Bush's proposed $1.6 trillion tax reduction. In the process, the $526 billion diversion of funds from the Medicare Hospital Insurance Trust Fund hastens that Trust Fund's insolvency by 15 years. Rather than remaining solvent until 2025 (as projected in the most recent Trustees' report), the Trust Fund would become insolvent in the year 2010.