Medicare stands in worse financial condition than Social Security, in part due to the cost of the former’s new prescription drug benefit, according to two public trustees in their annual report for 2005.
The hospital insurance trust fund will be financially insolvent by 2020, according to Thomas Saving, an economist at Texas A&M University, and John Palmer, former dean of the Maxwell School at Syracuse University. Last year they estimated its insolvency by 2019, but higher income in 2004 and slightly lower expenditure projections than previously estimated altered their timeframe this year.
The addition of the Medicare prescription drug benefit contributed to the program’s financial problems, they said. While the status of Social Security has changed little since 2000, Medicaid has “deteriorated dramatically,” they wrote in the report. Medicare will pay for prescription coverage of dual Medicaid and Medicare beneficiaries starting in 2006, including about 70% of nursing home residents.
Treasury Secretary John W. Snow and Michael Leavitt, the secretary of the Department of Health and Human Services, defended the Bush administration’s focus on Social Security reform instead of Medicare. “The reason we’re dealing with Social Security now is that it cries out for answers,” Snow said.
