medicare

Medicare is one of the biggest expenditures of the Federal Government. As the ‘baby boomers’ retire, the expenses are expected to explode unless significant changes within the system occur. Medicare is the Government’s health insurance for the elder and the disabled.

We spoke off the record with an actuary  at a private firm which performs calculations on expected medical expenses for the Government insurance program. We were not surprised by what he said, but it was nonetheless frightening to hear confirmed

The actuary stated that the firm uses the most liberal assumptions for medicare health spending. The source stated that pressure was applied to perform calculations which would make costs seem lower. The assumptions used were not illegal but border-line absurd according to the source.

Pension funds also play accounting games with their assumptions but at least the public is much more aware. However, both public pensions and Medicare will be in significant trouble due to the gimmicks that they play.

When it came to the firm’s internal financial analysis, the numbers used to project revenue and expenses were extremely conservative.

Of-course there are many actuaries working on Medicare, since it is an enormous problem.  If pressure is being applied on one firm, it is naive to assume it does not occur on a widespread basis.

According to a report today from the The Centers for Medicare & Medicaid Services (CMS) Medicare Will Go Broke in 2016, when excluding Obamacare’s Double-Counting.

Below is a chart from the CMS’ report:

The report further stated that:

HI (hospital insurance) expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years. Trust Fund interest earnings and asset redemptions are required to cover the difference. HI assets are projected to cover annual deficits through 2023, with asset depletion in 2024. After asset depletion, if Congress were to take no further action, projected HI Trust Fund revenue would be adequate to cover 87 percent of estimated expenditures in 2024 and 67 percent of projected costs in 2050. In practice, Congress has never allowed a Medicare trust fund to exhaust its assets.

The financial projections for Medicare reflect substantial cost savings resulting from the Affordable Care Act, but also show that further action is needed to address the program’s continuing cost growth.

The trustees are not Paul Ryan or GOP members. The trustees are Timothy  Geithner, Health and Human Services Secretary Kathleen Sebelius, Labor Secretary Hilda  Solis, and Social Security Commissioner Michael Astrue.

Based on what we heard the assumptions are likely far worse than the Government is admitting to.