Rates of Deterioration Key to Understanding Medicare Projections

“The ‘spin’ surrounding the Trustees Reports will largely involve what the new health care bill did and did not do to ‘solvency’ and other metrics. Unfortunately, the real ‘news’ in the reports is that the window for reform to slow the growth of these programs and to keep taxes at historical levels has nearly closed. Program beneficiaries need to be told of changes before they retire so they can adjust their life plans accordingly. If someone knows in advance that Social Security benefits will be lower or Medicare Part B premiums higher, they can delay retirement and make other changes. When people are informed of these changes in retirement, that flexibility has been taken away, leaving them worse off. Yet, if reforms are passed in say 2013 (a soon but reasonable timeframe) and they exempt future beneficiaries within 10 years of retirement, the reforms will (or can only) address less than 40% of the entitlement cost growth. In short, the painful process of adjusting to a much larger government will have already been baked into the cake.”