Democrats’ Reckless Medicare Expansion

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When the United States entered World War II and rapidly ramped up military production, it drove debt to its largest share of the economy in the nation’s history. But as the crisis ended, that spending wound down, and debt returned to more sustainable levels.

What is happening now is something quite different. Even before the COVID-19 pandemic hit, the U.S. was already on an unsustainable fiscal path, primarily as a result of spending on entitlements. Starting from this already historically high baseline, Congress enacted $6 trillion worth of spending during one year, spanning two administrations. Last year, debt exceeded the size of the economy, and this year, according to the Biden administration’s budget request, it is expected to break the World War II record and reach 109.9 percent of gross domestic product.

In a sane world, now that the pandemic has receded, the focus of lawmakers would be on how to wind down crisis-era spending patterns. If they wanted to be responsible, they would even be using this opportunity to fix our broken entitlement system. Instead, they are moving in the opposite direction.

Democrats, at President Biden’s urging, are proposing $4.1 trillion worth of new spending in spite of the mounting debt and in the face of a growing inflation problem. At least some Republicans have already signed on to support nearly $600 billion of that new spending as part of a so-called bipartisan compromise, so they should be seen as complicit.

What’s amazing is that not only are Democrats pushing to add a massive amount of money to our already unsustainable spending obligations, but they are actually planning to expand Medicare — the program that is the single biggest driver of the longer-term debt problem. Without changes, the program is expected to see its annual spending more than double over the next decade. In ten years, Medicare is projected to surpass Social Security as the largest program in the government and absorb nearly one out of every three tax dollars collected.

Though Medicare is in dire need of reform, Democrats say they want to add dental, vision, and hearing benefits to the program. This is such an incredibly irresponsible idea that even Canada, often touted as a generous socialist system, does not include vision and dental care in its universal care program. The idea that there is an urgent need to make our Medicare system more expansive than our socialist neighbor’s is absurd on its face, but it is an even worse idea when considering fiscal reality.

It should be stated that we have yet to have a clear picture of how the pandemic ravaged Medicare’s finances. That’s because the annual report of the program’s trustees, statutorily due on April 1st, is more than three months overdue. But in April of 2020, the trustees did give us an update, and it wasn’t pretty.

The report revealed that the core hospital insurance program was already running a deficit and that spending would exceed revenue “in all future years.” The program’s trust fund (an accounting fiction that represents money owed to Medicare from the general treasury) was set to be depleted just five years from now — in 2026. At that point, lawmakers will be forced to choose between tax hikes and an immediate 10 percent cut in the program. The trust fund, according to the report, “does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.”

Other parts of Medicare, which deal with physician services and prescription drugs, are financed by premiums and tax revenue, so they are not part of the trust-fund accounting. However, the trustees warned that the financing “would have to increase faster than the economy to cover expected expenditure growth.”

The trustees were stark in their conclusions:

The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges. The sooner solutions are enacted, the more flexible and gradual they can be. The early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior. The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.

Instead of taking up this sense of urgency, Democrats are actually making the crisis worse.

While they claim that their massive spending binge will be paid for, we have not seen the details on the tax increases they have in mind, and this also neglects an important point. New spending increases the strain on the budget regardless of whether it is offset by tax increases. The reason is that any tax increases that are used to expand Medicare are revenues that no longer are available to address the preexisting crisis.

Democrats are acting recklessly, and Republicans, who have squandered their credibility on the debt issue, are aiding and abetting them.