Medicare Costs Are Worst of All

04/27/2009 10:50 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

If you’re stressed out over the possibility that Social Security costs will overwhelm our federal budget, wait until you see the impact of Medicare.  

While Social Security (and railroad retirement benefits) are estimated to cost the government approximately $600 billion in fiscal 2008, Medicare costs will soon exceed the bill for Social Security.

Medicare currently costs the government $390 billion a year. But its rate of growth is twice as fast as Social Security’s. And that is before you factor in costs for the new Medicare Part D drug program.  Conservatively, it’s estimated that in the next ten years, Medicare spending will consume at least 25% of federal income tax revenues.

Keep in mind, that doesn’t include a fast growing segment of government spending—Medicaid.  This shared program with the states is also growing exponentially, as it is used to cover nursing home care costs for indigent seniors.

In fact, according to the National Center for Policy Analysis, the combination of Social Security, Medicare, and Medicaid payments will soak up nearly two-thirds of every dollar collected in income taxes in 2030!  

Since 1970, the share of gross domestic product spent on health care has more than tripled, from 5% to 16%, according to the National Center for Policy Analysis. And, according to Congressional Budget Office and Medicare forecasts, health care spending will exceed 40% of GDP by 2040—just 30 years from now.

My mother recently spent a month in the hospital with bacterial pneumonia. (She’s fine now.) She received fabulous care, with the best specialists. Imaging tests, diagnostic procedures, intravenous antibiotics, and round-the-clock care must have cost a fortune. But I don’t know. We never saw a bill.

So, I send my gratitude to all of you who paid into Medicare, allowing her to receive these wonderful treatments. Now, the big question is: who will pay for YOU?? (And me??)

Do you think Medicare will be able to pay for such expensive care when you need it? Will you have to pay more? And what should we do to fix the system before it bankrupts all of us?

Please join the conversation by posting a comment now.

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