Budget Background

Medicare Funding Crisis Nears, But President Bucks Law Mandating Rescue Plan


The law requires action by the President when Medicare’s finances are determined to be on an unsustainable course. In any year when the program’s Trustees issue a Medicare funding warning—defined as when more than 45 percent of Medicare outlays are expected to be paid for out of the Treasury’s general fund, which suggests impending insolvency—the President is required to submit to Congress a proposed legislative solution within 15 days of his next budget. This legal requirement is known as the “Medicare trigger.”

Following President Bush’s compliance with the first trigger in 2008, for four consecutive years President Obama has ignored the trigger and violated his statutory obligation to address the funding warning. Senate Budget Committee Ranking Member Jeff Sessions and House Budget Committee Chairman Paul Ryan have written the President the past two years urging him to comply with the law by submitting a legislative proposal to Congress, but President Obama has never done so.

In addition to determining whether a statutory Medicare funding warning is triggered, the Trustees’ annual reports also include various estimates (taking into account that future policy and economic scenarios are uncertain) of the date when Medicare’s Hospital Insurance (HI) trust fund will become insolvent. Although most of the attention surrounding the Trustees’ report tends to focus on the so-called intermediate scenario, under which the HI trust fund is projected be insolvent 12 years from now, the Trustees also include other projections that are meant to depict a range of possible outcomes if health care costs increase or decrease more than expected under the intermediate “best guess” scenario. The Trustees’ projections under their high-cost scenario (see here) represent the likely outcome if, for example, inflation is higher and health care costs rise faster than projected.

Notably, the President’s budget contains no structural Medicare reforms to put the program on a sustainable course for future generations: instead, his health law cuts hundreds of billions of dollars from Medicare to create a whole new entitlement program (rather than setting those savings aside to extend the life of Medicare). It then relies upon a double-counting gimmick that pretends the money could be spent on both Medicare and the new program at the same time. Despite the presence of this accounting gimmick, the Trustees have issued funding warnings every year since the President’s health law was enacted.

Meanwhile, in the face of these systemic financial threats, Senate Democrats haven’t even offered a budget at all in 1,200 days.