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Five Things to Know About Medicare, Social Security, and the Budget Deficit

one_01_98Medicare and Social Security are enormously successful programs that have provided a strong safety net for Americans.
As a result of Medicare and Medicaid, the number of older Americans with hospital coverage has raised from less than 50 percent in 1965 to 100 percent today.[1]  Without Social Security, 40 percent of those 65+ would fall below the poverty level.[2] Social Security also supports widows and dependent children of deceased or disabled beneficiaries. Persons with disabilities under 65 receive both Social Security and Medicare benefits.

two_01_98Nearly one half of all healthcare spending in the United States is by the federal government.
Healthcare spending, both public and private, equals 16 percent of the total economy, two times what we spend on food. Healthcare costs are increasing much faster than inflation, and nearly half of the spending is by the federal government. Federal spending includes Medicare (about 45 million Americans); Medicaid (about 60 million Americans); children’s healthcare (SCHIP, covering 11 million children); and military, veteran’s and civil employees (26 million).[3] Budget experts agree that we cannot control public spending on healthcare without reforming the system to control overall healthcare spending.

three_01_98Healthcare in the U.S is the costliest is the world, yet the U.S. lags behind other countries on many dimensions of quality.
The United States spends more per capita on healthcare than other countries and has one of the highest rates of growth in spending.[4] According to The Commonwealth Fund, an independent research foundation, compared to six other developed nations the United States ranks last or next to last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives.[5]

four_01_98Social Security was intended to be one leg of a three-legged stool, and revenues from current workers pay for benefits for current recipients.
When Social Security was established in 1935, it was designed to be a back up to personal savings and employer pension plans. As people have saved less and employers have dropped pension plans, people have become more dependent upon Social Security benefits. Because benefits are paid from current worker revenues, as the ratio of worker to retirees decreases there is less money to go around. In 1960 there were 5.1 workers per beneficiary. Today that number has dropped to 3.3 workers and, over the next few decades as the boomers retiree, the ratio will fall to 2 workers per beneficiary.[6] While Social Security trust funds indicate solvency well into the future, the funds are filled with IOUs from other branches of government. Although the federal government owes money to these funds, there are serious questions about where the dollars to repay would come from.[7]


five_01_98The growing population of older Americans due to aging boomers and increased longevity means that the costs for government healthcare programs and Social Security are increasing at an unsustainable pace.

Spending on these programs is increasing at a much faster pace than economic growth. At the current rate of increase, the cost of these programs will cause major problems to our economy for the long term. All sides agree that we need to “bend the curve” on healthcare costs.  In other words, reduce the rate of increase on these costs.


Medicare, Medicaid, and Social Security now consume almost 42 percent of federal spending. Not addressing these cost increases will require deep cuts in future benefits, other government services, or steep increases in tax revenues.



Do you want to learn more?

Take a look at these additional resources from nonpartisan or bi-partisan sources.



[1] “Medicare Now and in the Future.” Kaiser Family Foundation.
[2] “Social Security, the Budget, and an Aging Population.” Public Agenda.
[3] “America’s Health Care Challenge: How Can We Best Contain Costs, Increase Access and Maintain Quality?” Public Agenda.
[4] “Health Care Spending in the United States and Selected OECD Countries April 2011.” Kaiser Family Foundation.
[5] Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update. June 23, 2010. Authors: Karen Davis, Ph.D., Cathy Schoen, M.S., and Kristof Stremikis, M.P.P. The Commonwealth Fund,
[6] “The Future of Social Security,” Statement of Robert L. Bixby, Executive Director, Before Senate Special Committee on Aging
[7] “Social Security Series-Social Security's Trust Funds Mask the Problem.” Concord Coalition.



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