Medicare Trust Fund Finances

Yesterday I showed data on Social Security income and expenditures. Today I am showing similar data for the Medicare Trust Funds. That is a plural because three programs are found within Medicare. Of these one is Hospital Insurance (HI), one is Supplemental Medical Insurance (SMI) which comes in two parts, B and D. Part B pays for doctors visits and outpatient care, Part D pays for pharmaceuticals.  In the following graphic, I show income and expenditure data for all three combined for 1990, 1995, and for 2000-2012. Data to 2010 are from  the Statistical Abstract (link); data for 2011 and 2012 are from Centers for Medicare and Medicaid, the federal agency (link).

Notable here—in contrast to the data for Social Security—is that the income stream matches the outflow in benefits much more closely. In the thirteen-year 2000-2012 period, income exceeded or matched expenditures in ten years, fell below expenditures in three. The other significant difference is that Social Security income consists entirely of earmarked tax revenues from the public and interest earnings, while the Medicare Trust Funds rely much more heavily on general revenues and other sources of income. The following tabulation makes that clear:

Medicare Trust Funds Income in 2011
	$ bil.	Percent
Payroll/Premiums	259.9	49.2
General Revenues	225.2	42.7
State Contributions	6.5	1.2
Interest	20.7	3.9
All other	15.7	3.0
Income	528.0	100.0
Expenditures	560.3	106.1

The reason why Medicare is of such interest to would-be budget-cutters is the large role that general revenues represent in Medicare. It is 42.7 percent but would have to be more like 46 percent for these trust funds to have broken even in 2011. If the GOP had wished to insist on making Medicare altogether self-supporting, it would have loaded the aging population with $257.5 billion in out-of-pocket expenditures. Not taking care of our elderly—unless they’re rich. Is that what Free Market dictates at the moment?

Now as for Medicaid, which is designed for the poor, that’s entirely funded from general revenues. If that is chopped away from the budget as well, we’ll be well on our way to recreating the glorious days of Dickensian England.