The latest report issued by the Medicare Board of Trustees stated that the program will become insolvent by 2019.  Last year’s report also set in to motion the 45% cost trigger warning which forces the President and Congress to address the issue sometime this year.

When Congress created a universal prescription drug benefit with the Medicare Modernization Act of 2003 (MMA)–adding an estimated $8 trillion to the program’s long-term unfunded liability–it enacted a “cost containment” mechanism designed to control excessive general revenue funding for Medicare.

That amount becomes “excessive” when it funds more than 45 percent of the total Medicare outlays. The “trigger” for presidential and congressional action is when two consecutive Medicare trustees’ reports project that the “excessive” threshold will be met within seven years. 

The Medicare program was initially to be funded through the use of payroll taxes but the explosive growth of healthcare costs has far outstripped it’s ability to fund the program.  Most of the attention lately has been given to Social Security but in contrast that program isn’t expected to become insolvent until 2041.

The program’s growing financial woes has been accumulating for years and the cost trigger warning does little in of itself to address the long term unfunded liabilities, as it only concerns the 45% general revenue funding level.  To deal with the program’s liabilities, the government can either raise taxes, cut benefits or lower healthcare costs.

Obviously controlling healthcare costs would be the best possible solution, but seeing as no one in the government has figured out how to do that yet, that only leaves the two unpalatable options.  What ever they do decide to do, they need to do it quickly because time is running out.

The latest report issued by the Medicare Board of Trustees stated that the program will become insolvent by 2019.  Last year’s report also set in to motion the 45% cost trigger warning which forces the President and Congress to address the issue sometime this year.

When Congress created a universal prescription drug benefit with the Medicare Modernization Act of 2003 (MMA)–adding an estimated $8 trillion to the program’s long-term unfunded liability–it enacted a “cost containment” mechanism designed to control excessive general revenue funding for Medicare.

That amount becomes “excessive” when it funds more than 45 percent of the total Medicare outlays. The “trigger” for presidential and congressional action is when two consecutive Medicare trustees’ reports project that the “excessive” threshold will be met within seven years. 

The Medicare program was initially to be funded through the use of payroll taxes but the explosive growth of healthcare costs has far outstripped it’s ability to fund the program.  Most of the attention lately has been given to Social Security but in contrast that program isn’t expected to become insolvent until 2041.

The program’s growing financial woes has been accumulating for years and the cost trigger warning does little in of itself to address the long term unfunded liabilities, as it only concerns the 45% general revenue funding level.  To deal with the program’s liabilities, the government can either raise taxes, cut benefits or lower healthcare costs.

Obviously controlling healthcare costs would be the best possible solution, but seeing as no one in the government has figured out how to do that yet, that only leaves the two unpalatable options.  What ever they do decide to do, they need to do it quickly because time is running out.

Healthcare reform has been slow to take shape at the federal level.  For example, last year the President and Congress were unable to come to a compromise on the expansion of the State Children’s Healthcare Insurance Program, which provides affordable insurance for low income families with children.

The battle over the increased ”federalization” of healthcare is at a standstill, at least until the next administration takes office.  Thus the states have begun to try their hands at dealing with the issue of healthcare reform.

State approaches to reform vary considerably, often depending on the political and fiscal environment; demographic characteristics, insurance market dynamics, and other economic variables also affect a state’s capacity to act.

“More and more often we’re seeing states attempt to address health reform with a balance of coverage expansions, quality improvement efforts, and cost-containment strategies,” said Martinez-Vidal. “They continue to take the lead in addressing the problems of the uninsured.”

The number of uninsured continue to grow as the nation’s economy enters a difficult period.   The general decline in employer paid health coverage has also made a large impact.

For decades the focus of the nation’s healthcare policy was centered on the elderly but as the uninsured reached epic proportions that policy has shifted somewhat.  There is still the looming fiscal difficulties facing the Medicare program in the upcoming decade.

The problem with healthcare reform has always been the cost.  The healthcare system in this country is the most expensive in the world with the highest per capita cost.  Government dollars spent at all levels account for nearly half of the total money spent on healthcare in this country.

The states face a difficult challenge ahead of them and with the many different approaches being taken, the results I’m sure will vary considerably.