The Medicare Trust Fund isn't worth the paper it's printed on

Congress is either stupid or they're trying to pull a fast one. They continue to scare seniors with the malarkey that the Medicare trust fund will soon become “insolvent.”

Federal trust funds are totally different from the private trust funds that most of us are unfamiliar with. In contrast to private funds, the federal trust funds are owned by the federal government. Therefore, the feds can do whatever they want with any money deposited into them.

For example, the feds routinely “borrow” billions of dollars from the social security and Medicare trust funds.

They write IOUs for these withdrawals (Treasury notes) but that means little because they don’t have any intention in repaying these loans. Let’s face it, they’re just using F.I.C.A. and Medicare taxes as income taxes.

So, what happens when the Medicare trust fund balance reaches zero, or becomes negative? Absolutely nothing. Current tax receipts, proprietary receipts, and borrowing from the public (deficit spending) pay for current Medicare program outlays. Future benefit payments to Medicare and Social Security must be paid for with future collections and borrowing; the government does not squirrel away real economic assets to pay for future Medicare outlays.

By law the federal government must make good on its obligations to beneficiaries. The trust fund balances are irrelevant, both financially and legally.

Of course, this doesn’t mean we shouldn’t be curbing healthcare costs. If we continue to spend the way we have it is estimated that Medicare spending will double to over $900 billion annually in the next 10 years. Increased costs will have to be funded either by increased taxes, decreased benefits, or increased borrowing (deficit spending). Hopefully, Obamacare will bend the rise in costs.
 

Jeff Kreisberg blogs regularly at Taking Control of Your Healthcare.