Tax Revenues Devoured by Entitlements

Michael Sandoval, Heritage Investigates: The looming unsustainability of the big three entitlement spending programs—Medicare, Medicaid, and Social Security—is not inevitable, but in order to avoid the catastrophic effects of consuming every bit of tax revenue in just one generation, reform is a necessity.

Take a look at Medicare, the largest portion of the projected entitlement expense by the year 2045.

Here’s the projected outlook of spending on Medicare, Medicaid, and Social Security by 2045, when entitlement spending matches tax revenues, from Heritage’s Federal Budget in Pictures, using Congressional Budget Office figures:

The need for Medicare reform in light of the impending crisis going forward has elicited the acknowledgement of all sides, which Heritage’s Amy Payne highlighted in a recent Morning Bell:

Quick quiz: Who said this about Medicare? “With an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it.”

…It was President Barack Obama, just last year.

Obamacare has already ended Medicare “as we know it.” Obamacare will not preserve Medicare or even prevent the program’s descent into unsustainability. Instead, as Heritage’s Alyene Senger reported, the Congressional Budget Office adjusted its estimate of Medicare cuts to $716 billion over 10 years, in a raid on Medicare’s core services:

According to the CBO, the payment cuts in Medicare include:

• $260 billion payment cut for hospital services
• $39 billion payment cut for skilled nursing services
• $17 billion payment cut for hospice services
• $66 billion payment cut for home health services
• $33 billion payment cut for all other services
• $156 billion cut in payment rates in Medicare Advantage (MA); $156 billion is before considering interactions with other provisions. The House Ways and Means Committee was able to include interactions with other provisions, estimating the cuts to MA to be even higher, coming in at $308 billion
• $56 billion in cuts for disproportionate share hospital (DSH) payments.* DSH payments go to hospitals that serve a large number of low-income patients.
• $114 billion in other provisions pertaining to Medicare, Medicaid, and CHIP* (does not include coverage-related provisions).

Far from protecting seniors and preventing the program’s insolvency, the Medicare raid cuts services for seniors and hastens Medicare’s impact on the federal credit card, as it makes up the largest portion of the projected entitlement spending by 2045.

Only true reform—particularly, converting Medicare to a “premium support” system—could produce the adjustment necessary to keep Medicare from careening out of control.

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