A new study by the Urban Institute reconfirms a vital fact: Medicare’s massive increase in enrollment, largely attributable to retiring baby boomers, is driving its fiscal instability.
This is an important finding, because during the health care debate of 2009, advocates of Obamacare insisted that excess health care cost inflation was the more urgent problem contributing to Medicare’s fiscal nightmare. A recent report by Charles Blahous, a public trustee for Medicare, explains:
This viewpoint increased in prominence when Peter Orszag, one of [Obamacare’s] leading advocates, was named to head the Congressional Budget Office (CBO). Soon thereafter, CBO published a frequently cited graph that appeared to substantiate the view that the fiscal problems created by excess health care inflation dwarfed those arising from other known sources of fiscal strains, such as population aging.
So the primary target of Obamacare was Medicare payment reduction, not structurally modifying Medicare to absorb the large enrollment increase in the coming years.
Many opponents of the law believed that the CBO and the law’s advocates had overstated the effect of health care inflation and understated the enrollment issues. They were proved right. As as Blahous writes:
CBO later modified its presentations to clarify that population aging would remain the more significant source of fiscal strain for decades into the future. In 2011, for example, CBO found that through 2035, population aging would account for fully 64 percent of the cost growth in the major federal mandatory health programs and Social Security, with excess health cost inflation being a relatively smaller factor.
Therefore, the Urban Institute’s recent conclusion that “spending growth in Medicare and Medicaid is greatly affected by enrollment” is a welcome contribution to the emerging Medicare reform debate.
For Medicare to become fiscally sustainable, structural changes must be made to accommodate for retiring baby boomers. To read The Heritage Foundation’s plan that would make the structural changes in Medicare and ensure that the program exists for future generations, click here.