The Sound Bite:

President Bill Clinton, in his speech at the 2012 Democratic National Convention, stated that if GOP presidential candidate Mitt Romney is elected, and does repeal the Affordable Care Act, Medicare “will now go broke in 2016.”

Fact or Fiction?

Fiction. According to the Medicare Trustees’ 2012 report, the Medicare Part A (Hospital Insurance) Trust Fund was expected to be exhausted in 2016. The Affordable Care Act, which includes up to $716 billion in Medicare spending cuts from 2013 to 2022, pushed that date back to 2024.

However, there is a difference between going “broke” and exhausting funds. Whether it's 2016 or 2024, Medicare will remain for seniors, though likely with fewer benefits. According to the trustees’ report, when the funds are exhausted in 2024 under the ACA, payroll taxes can still cover “87 percent of estimated expenditures in 2024 and 67 percent in 2050” for Medicare Part A (Hospital Insurance) alone. Medicare Parts B (Medical Insurance) and D (prescription drug coverage) are funded by general revenues appropriated by Congress and premiums paid by beneficiaries. In addition, even if Medicare Part A is short on cash, Congress has the ability to add money to the HI Trust Fund.

According to MNG contributor John Wasik, it is best to look at the Medicare Trustees’ report as a “guideline, not as a crystal ball” because speculations are based on an ever-changing economic outlook. For example, a Congressional Research Service report in 2009 said the HI trust fund has faced a projected shortfall almost from its inception. In 1970, the projected insolvency of the HI Trust Fund was 1972.

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