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					          Medicare in Crisis

                     Thomas R.Saving
Director, Private Enterprise Research Center, Texas A&M University,
         Senior Fellow, National Center for Policy Analysis,
   and Public Trustee of Social Security and Medicare Trust Funds




                  Private Enterprise Research Center
                        Texas A&M University
                                                                      1
The Funding Future of Elderly
    Entitlement Programs




        Private Enterprise Research Center
              Texas A&M University
                                             2
                                       Combined Social Security and Medicare Expenditures
                                           and Income by Source as a Percent of GDP
                                  16
                                                                             Year of OASDI Trust
                                                                              Fund Exhaustion




                                                                                                                        Total General Revenue
                                                                                                                        Transfers or Shortfalls
                                  14
                                            Year of HI Trust
                                            Fund Exhaustion
                                  12
                 Percent of GDP




                                  10
                                                                                                   Premiums
                                  8


                                  6




                                                                                                                     Total Taxes and
                                                                                 Tax on Benefits




                                                                                                                        Premiums
                                  4


                                  2
                                                                                            Payroll Taxes

                                  0
                                  2002    2010    2018    2026   2034    2042    2050     2058      2066      2074

                                                                 Calendar year
Source: 2002 Social Security and Medicare Trustees Reports and author’s estimates

                                                     Private Enterprise Research Center
                                                           Texas A&M University
                                                                                                                                                  3
                                                        Social Security and Medicare Funding Shortfalls
                                                             as a Percent of Federal Income Taxes
                                                  80

                                                  70

                                                  60
                Percent of Federal Income Taxes




                                                  50

                                                  40

                                                  30

                                                  20

                                                  10

                                                    0
                                                     2002   2010   2018   2026   2034    2042    2050      2058   2066   2074
                                                  -10
                                                             Calendar Year
Source: 2002 Social Security and Medicare Trustees Reports and author’s estimates
                                                                      Private Enterprise Research Center
                                                                            Texas A&M University
                                                                                                                                4
The Burden of Elderly
  Entitlement Debt




    Private Enterprise Research Center
          Texas A&M University
                                         5
            Debt Held by the Public and Accrued
           Social Security and Medicare Benefits in
                             2001
           18,000
           16,000
           14,000
           12,000
Billions




           10,000
            8,000
            6,000
            4,000
            2,000
               0
                    Debt Held by Public   Accrued Social Security      Accrued Medicare
                                                 Benefits                  Benefits

                                  Private Enterprise Research Center
                                        Texas A&M University
                                                                                          6
       Composition of Total Debt
               in 2001
Category                                            Billions          % of GDP
Debt held by the public                                       3,320      32.70
Accrued Social Security Debt                             12,919         127.24
Accrued Medicare Debt                                    17,404         171.42
Total                                                    33,643         331.36

Sources: 2003 Federal Budget, Unpublished Social Security Administration
estimates (2001), and authors’ calculations.

                         Private Enterprise Research Center
                               Texas A&M University
                                                                             7
The Funding Future of
  Current Medicare




     Private Enterprise Research Center
           Texas A&M University
                                          8
                              Medicare Expenditures and Income
                        by Source as a Percent of Gross Domestic Product
                 9

                 8




                                                                                                       Total General Revenue
                                                                                                       Transfers or Shortfalls
                 7
                          Year of HI Trust
                 6        Fund Exhaustion
Percent of GDP




                 5

                 4

                 3




                                                                                                       Total Taxes and
                 2                                                                       Premiums




                                                                                                          Premiums
                 1
                                                           Tax on Benefits          Payroll Taxes
                 0
                 2002    2010    2018        2026   2034   2042     2050     2058      2066     2074

                                                    Calendar year

                                        Private Enterprise Research Center
                                              Texas A&M University
                                                                                                                                 9
                                                                Medicare Funding Shortfalls as a
                                                                Percent of Federal Income Taxes
                                                 60


                                                 50
               Percent of Federal Income Taxes




                                                 40


                                                 30


                                                 20


                                                 10


                                                 0
                                                  2002   2010    2018      2026    2034    2042     2050     2058   2066   2074
                                                                                    Calendar Year

Source: 2002 Medicare Trustees Report and author’s estimates
                                                                        Private Enterprise Research Center
                                                                              Texas A&M University
                                                                                                                                  10
                                         Medicare Part B Premiums as a
                              Percent of Average Retiree’s Social Security Benefits
                         15

                         14

                         13

                         12

                         11
               Percent




                         10

                         9

                         8

                         7

                         6

                         5
                          2002    2010   2018     2026   2034    2042       2050   2058   2066   2074
                                                            Calendar Year

Source: Estimated from 2002 Social Security and Medicare Trustees Reports

                                                Private Enterprise Research Center
                                                      Texas A&M University
                                                                                                        11