July 30th was the 50th Anniversary of the creation of Medicare, which has been of considerable importance to many Americans. Medicare’s anniversary should serve as a call to action for achieving the reforms needed to prevent Medicare from becoming insolvent.
To protect current and future Medicare enrollees, comprehensive reforms of the Medicare program must be enacted. The Medicare Trustees report the program faces an unfunded liability of nearly $25 trillion, and the program is currently on track to be insolvent in 2030, if action is not taken to reform the program. Additionally, the federal government is expected to dramatically increase Medicare spending during the next decade, increasing the program’s already enormous contribution to the national deficit. Social Security and Medicare together accounted for 42 percent of federal program expenditures in Fiscal Year 2014, according to the recent Medicare and Social Security Trustees report. We must address its cost burden now to ensure that it is sustainable.
Earlier this year, Congress passed and the president signed into law H.R. 2, which made substantive reforms to Medicare. This law repealed the flawed Sustainable Growth Rate formula and contained needed adjustments and reforms to our Medicare system. For the first time, the law included structural reforms to the program intended to help reduce deficit spending and improve Medicare’s solvency. These include Medigap reform and modest means testing. However, more work is needed to ensure the program’s long-term solvency.
On July 30, 1965, then President Lyndon B. Johnson signed the Social Security Amendments of 1965 into law, creating Medicare. Medicare was initiated to address the deficiency of health insurance coverage of America’s senior citizens, and was later expanded to assist the permanently disabled. The non-partisan Congressional Research Service reports that in Fiscal Year 2015, the program will cover approximately 55 million persons (46 million aged and 9 million disabled) at a cost of about $632 billion.
While I have focused this column on Medicare, as this program recently reached a significant milestone, the Social Security program, which turns 80-years-old in August, is also in need of reform to ensure that it does not become insolvent. In less than 10 years, spending on Social Security benefits will exceed interest earnings, and trust fund reserves are projected to be exhausted by 2035. The disability insurance portion of Social Security is expected to be depleted in late 2016. At that point, beneficiaries will see a 19 percent reduction in benefits.
Reforming these programs requires tough decisions, but decisions that need to be made now. The need for reforms has been discussed for decades, and it is time to act. If we wait to address the problem, the only solutions will be substantial tax increases and massive new borrowing or large cuts in benefits or other government programs. As I continue to work for reforms, the foremost objective will continue to be maintaining the promises made to protect current recipients, while strengthening the system to guarantee benefits for future retirees. We must use this significant milestone as a call to action to bring about the reforms necessary to shore up Medicare.