In case you were wondering what effect Obama’s health care legislation (Affordable Care Act) will have on Medicare (’cause I’m sure everyone was wondering this), I have some visual aids for you.  I create these for my Introduction to Sociology class for the chapter on aging.  But the change was so dramatic I figured others might want to see what is going to happen.

In the 2009 report by the Social Security Administration, they reported that medicare was already paying out more than it was receiving in taxes, but the trust fund and interest on the trust fund were making up for the shortfall.  However, the trust fund assets would have been exhausted by 2016, at which point the amount that would be paid out to those making claims on medicare would be about 81% of what they were supposed to get, and that percentage would drop down to about 50% by 2036, then continue to fall to about 30% by 2080.  This is depicted in the figure below.

(click for full size)

The blue bars indicate how much would be paid out and the red indicates the use of trust fund reserves and interest that would be used to make up the shortfalls in taxes.

With the passage of the Affordable Care Act in 2010, the picture changes dramatically (per the Social Security Administration’s report).  Now, while we are currently in a shortfall and using reserves and interest, there will actually be a surplus from 2015 through 2019 (when the recession ends), at which point we’ll again have a deficit.  Trust fund reserves will be used up by 2028 or so, but people will still receive about 84% of what they are supposed to.  That will decline to 77% by 2050, then climb again to 89% by 2084.  Here’s how things look graphically:

(click for full size)

Whether you agree with the legislation or not, it’s hard to argue that it didn’t go at least some way toward addressing the problems facing Medicare.

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5 Replies to “Something Interesting”

  1. @Ezra
    Alas, I don’t have earlier ones. I’m sure such information could be dug up. You’re right that these projections could be wildly off. But that seems questionable given who is creating them. Maybe I have too much trust in government, but I don’t think actuaries, statisticians, and economists would be allowed to keep their jobs if they were wildly wrong.

  2. @Ezra
    All valid points. However, would Republicans let the SSA make wildly off-target projections without rebuttal? My sense is that patently ridiculous projections would be fodder for a media firestorm. They may be off a little bit, but substantial errors would likely be flagged – precisely for political reasons. I could be wrong… But it seems like political motivations are likely to keep these fairly accurate.

  3. Do you have a chart from the SSA from, say, 1980 to today, on what the SSA projected their expenditures would be at the beginning of the period vs. what they actually were? I.e., how do we know whether these 70 year projections are believable in either chart?

  4. Actually, government jobs are relatively stable outside of elected office. There are conflicts of interest between the people that the actuaries/statisticians report to, and the goals of the electable people they report to who want to look good/make the other guy look bad. For instance, the SSA under Obama is ‘motivated’ to make the Affordable Health Care Act look like it is significantly solving a problem, as the graphs show. The people in charge of Medicare when it was originally passed were similarly ‘motivated’ to project that it wouldn’t cost all that much (I know the original projections and the actual costs are WAY off).

    I’ve never seen a report/study on what actually gets an actuary/statistician within the government fired, if anything. Even actual spending isn’t tracked precisely (e.g., war profiteering from Iraq), and people aren’t really punished for it.

  5. That’s assuming that the points of rebuttal on the health care debate for the Republican’s center around the SSA’s report, which they don’t tend to do. Government take-over of personal choice, free market competition via interstate operations, tax rebates, etc. are what resonates with their base.

    The projects of 30% for 2080 may have been done (or at least have been predictable) under a Republican watch, in which case them bringing it up forces them to discuss the problems of the SSA and the need for reform. They tend to focus on the CBO’s 10 year projections, which they do criticize as being inaccurate and unreliable.

    The paradigms the two groups operate out of, and the arguments they consider valid for debate are different (see Kuhn and paradigms talking past one another). Pro-reformers would consider this strong evidence to support the reform. Anti-reformers would consider it a low priority and shift the debate to things that are central to their main arguments.

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