The Depleted Medicare Part A Trust Fund Is An Opportunity, But Not for Government

Story Stream
recent articles

The Social Security and Medicare Boards of Trustees reported this year that the Medicare Part A Hospital Insurance Trust Fund will be depleted by 2026. If the Part A trust fund hits zero, Medicare will pay smaller shares of hospital bills, leaving senior citizens on the hook for more of these costs.

This is a fast-approaching crisis, we are told, that can only be averted by raising the payroll tax that finances most of the Part A trust fund, to replenish it and allow it to continue paying hospital bills at its present rate.

But those that demand more government spending as the supposed solution for every problem, real or imagined, are (yet again) mistaken. The depletion of the Part A trust fund does not signal a crisis. It instead presents an opportunity to stop part of the entitlement programs leviathan from further tightening its stranglehold on U.S. economic growth.

The Medicare Trustees reported that in 2018, the Part A trust fund spent over $308 billion, or 3.44 percent of the nation’s taxable payroll. They project that (if replenished) its spending will rise to 5.00 percent of the taxable payroll by 2046 and then to 5.32 percent by 2093. And the Part A trust fund is just part of the gargantuan Medicare program that in 2018 spent over $740 billion and that is projected to grow by 7.4 percent annually, over 50 percent faster than private health insurance spending.

Each dollar that the Part A trust fund and other entitlement programs take and spend is one less dollar saved by taxpayers and one less dollar invested. Former Federal Reserve Chairman Alan Greenspan’s analysis shows that for over half a century, entitlement program spending has been “crowding out domestic savings … on almost a dollar-for-dollar basis,” cutting the growth of the capital stock and productivity, and “as a result, poisoning GDP growth.”

Declining to raise the payroll tax and allowing the Part A trust fund to be depleted will avoid stealing yet more from savings and investment and spare vital economic growth from further harm.

The more-government-spending-solves-all crowd will cast the failure to replenish the Part A trust fund as a death sentence for senior citizens. Yet the Part A trust fund already requires seniors to pay substantial deductibles and coinsurance. Many seniors purchase private Medigap insurance to cover these costs. If the Part A trust fund is not replenished and starts paying a declining share of hospital bills, seniors can purchase more generous Medigap coverage. And seniors are well equipped to do this. Federal Reserve data show that they are the age group with the highest median income and wealth and lowest poverty rate.

Government has proven itself incapable of taking action to limit spiraling entitlement spending. The least it can do is allow the nation to benefit from this inaction by not taxing and spending more to replenish the Part A trust fund.

David M. Simon is a Chicago lawyer. The views expressed in this article are his own and not those of the law firm with which he is affiliated. For more, please see

Show comments Hide Comments

Related Articles