An annual ritual of spring: ‘The sky is falling! The sky is falling!’

Posted by AzBlueMeanie:

The Arizona Republic today published an annual ritual of spring, the gloom and doom forecasts for the social security and Medicare trust funds. Social Security heading for insolvency even faster. The sky is falling! The sky is falling!

First, you need to keep in mind that there is an entire cottage industry in conservative circles that has sought to do away with the social security and Medicare trust funds since the funds were first established. The latest iteration of this effort is Rep. Paul Ryan's "Roadmap to America's Ruin" that proposes to turn Medicare into a coupon voucher system to purchase private health insurance plans, and the GOP dream of privatizing social security into individual retirement investment accounts so the banksters of Wall Street can rip you off and leave you destitute remains alive.

And then there are the media enablers of this conservative opposition to social security and Medicare. I have told you about Pete Peterson ("I.O.U.S.A. Solutions") who wants to repeal social security and Medicare, and his group's unholy alliance with the Neoconservative Washington Post. Pete Peterson's war on social security – and his media enablers, and Washington Post GOPropaganda. This "GOPropaganda" gets fed into the echo chamber of the "lamestream" media for amplification without any critical analysis.

So it is nice to see that Sarah Kliff at Ezra Klein's WonkBlog tells everyone to take a deep breath and chill, Reports of Medicare’s death are greatly exaggerated:

Around this time last year, Americans got a dire warning: Medicare was heading into the red, quickly. “Medicare to go broke in 2024,” one headline proclaimed. “We know,” Sen. Kelly Ayotte (R-N.H.) told Fox News, “that Medicare is going broke by 2024.”

Those predictions of Medicare’s impending doom came from the 2011 Medicare Trustees Report, an annual look at the entitlement program’s finances. The dense, 267-page tome is never much of a page-turner. Most of it is obtuse, economical analysis and endless charts — not, of course, that there’s anything wrong with endless charts. But there’s one figure that always gets a lot of attention: The date by which, if things stay on current course, the Medicare trust fund will become insolvent.

[On Monday], the Medicare Trustees will release their 2012 report. It’s likely to elicit a similar round of headlines. Before that happens, it’s worth understanding why projections of the fund’s insolvency actually say very little about whether Medicare is going bankrupt. Reports of Medicare’s death are, as Mark Twain would put it, greatly exaggerated.

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In 1970, the Medicare Trustees began issuing annual reports on the financial state of the Medicare Trust Fund. It has faced a projected shortfall “almost from its inception,” a 2009 Congressional Research Service report found. In 1970, the Medicare Trustees Report predicted that the fund would be insolvent just two years later, in 1972. Pretty much every year after that, the Trust Funds’ insolvency has never seemed that far off:

Flash forward four decades, and Medicare still has the dollars to cover hospital visits. How does that happen?

It mostly has to do with the fact that the trust fund doesn’t really decide Medicare’s fate. Instead, it’s an accounting term. When we talk about the Medicare Trust Fund, we’re pretty much referring to where our payroll taxes to finance the insurance program get stored. If the Trust Fund runs out, that means it can no longer cover everything it’s supposed to pay for. But Congress could — and, many think, would — make up the difference by borrowing, cutting spending elsewhere and using the savings to plug the hole, or finding new sources of revenue.

* * *

The trust fund’s solvency depends on both what it takes in, via payroll taxes, and what it pays out in medical benefits. That means its solvency can fluctuate for reasons completely removed from the cost of Medicare. If the recession lowers the number of Americans who work and contribute to Medicare’s payroll taxes, for example, the Trust Fund gets fewer contributions.

The Trust Fund might not speak strongly to Medicare’s financial future. Politically, however, it has proved a powerful tool. Many major legislative changes to Medicare have happened at times when the Trust Fund has been projected to run out of money within the next decade.

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In fact, no one quite knows what would happen if the Trust Fund actually ran out of money. “There are no provisions in the Social Security Act governing what would happen in such an event,” the Congressional Research Service report concluded.

What it would not mean, however, is that Medicare would screech to a halt. Programs covering doctors’ visits and prescription drugs could continue on pretty much unfazed. As for hospital coverage, Congress could look for other revenue sources, or it could borrow, or it could move money over from other parts of the budget. Given Medicare’s political popularity, it’s difficult to imagine legislators letting the program go underwater.

Even the report in the Arizona Republic today Social Security heading for insolvency even faster cautions against "the sky is falling!' panic engendered by its headline:

If the Social Security and Medicare funds ever become exhausted, the nation's two biggest benefit programs would collect only enough money in payroll taxes to pay partial benefits. Social Security could cover about 75 percent of benefits, the trustees said in their annual report. Medicare's giant hospital fund could pay 87 percent of costs.

This is a far cry from the "broke" or "bankrupt" boogeyman politicians and lazy media villagers peddle every year at this time in an annual ritual of spring. There are reasonable solutions to shoring up the trust funds to continue in perpetuity. But that is not what conservative politicians seek. They want to end the "socialist" social security and Medicare trust funds, and leave seniors vulnerable to the ravenous banksters of Wall Street. And they have a compliant, indeed willing media to enable them.