Take Only As Directed

A former director of the Congressional Budget Office recently provided the National Journal with enough dour thoughts on the state of Medicare to ruin anyone’s pre-holiday festivities. Still, it’s nice of him to spread the warning.

Dan Crippen, former CBO chief and former domestic policy adviser to President Reagan, spoke with National Journal staff about the impending doom of Medicare, which for the first time this year will not collect enough in payroll taxes to pay for its Part A services, falling approximately $4 billion short. National Journal wanted to know at what point the nation would hit a Medicare crisis severe enough so that Congress would act to restore this essential program to sustainability.

The answer, in brief, is when foreigners stop buying Treasury bills. This may happen, Mr. Crippen says, because “it is also true that Japan and Europe are going to have the same demographic problems, and that means those folks buying our U.S. Treasuries are going to quit buying them and start selling them, to pay for retirement benefits.”

When that happens, Medicare is in deep trouble because there is not enough money to reimburse for medical services. “If you fully fund these programs,” Mr. Crippen says, “you have to eliminate the rest of government as we know it. Literally.”

Another way of looking at the enormity and seriousness of the problem is this: “It would take a payroll tax of 30 to 35 percent, if we were going to fund the gap with a payroll tax – a third of every payroll dollar would have to be paid to preserve the overall level of government today and to fund these [Medicare] programs until 2030.”

These comments are especially important to recall as the debate over reforming Social Security begins. Medicare will be in desperate shape sooner than Social Security, making it a more difficult problem to solve, but also requiring that the federal government use its limited resources to act on it quickly.

Health care is not an option for anyone, but seniors have even fewer choices than most. For boomers about to retire, the warning on their Medicare drug bottle is clear: Congress should take substantial health care reform immediately.