Composition of Liabilities 1994-2016
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The last time I wrote about this was four years ago. I have covered this topic off and on for the last 25 years. As usual, the report got released during a relatively dead time, January 12th, where most people were listening to the preparations for the inauguration. I’ll give them some credit though — not as much of a dead time as usual; it was in the middle of a work week, AND earlier than usual. (It would be nice to know when it’s coming, though.)
I have two main messages to go with my two graphs. The first message is one I have been saying before — beware some of the estimates that you hear, should you hear them at all. No one wants to talk about this, but what few that do will look at a few headline numbers and leave it there. Really you have to look at it for years, and look at the footnotes and other explanatory sections in the back when things seemingly change for no good reason. Also, you have to add all the bits up. No one will do that for you. Even with that, you are relying on the assumptions that the government uses, and they are not biased toward making the estimates sound larger. They tend to make them smaller.
Thus you will see two things that adjust the headline figures. In 2004, when Medicare part D was created, the Financial Report of the US Government began mentioning the Infinite Horizon Increment. Now, that liability always existed, but the actuaries began calculating how solvent is the system as a whole if it were permanent, as opposed to lasting 75 years.
The second is the Alternative Medicare Scenario. When the PPACA (Obamacare) was created in 2010, there was considerable chicanery in the cost estimates. The biggest part was that they assumed Medicare Part A (HI) would cost a lot less because they would reduce the amount that they would reimburse. They legislated away costs by assuming them away, and then each year Congress would restore the funding so that there wouldn’t be a firestorm when doctors stopped taking Medicare. But they left it in for budget and forecast purposes, and showed what the projections would be like if these cuts never took place in what they called the Alternative Medicare Scenario.
So, did the cuts to Medicare part A take place? No.
Graph Credit: The Boards of Trustees of the Federal Hospital Insurance Trust Fund (page 54)
As you can see they have gone up almost every year since 2010. The liability should not have gone down. If you think the Alternative Medicare Scenario is conservative enough, the liability has remained relatively constant since 2010, not diminished dramatically.