Budgetary Assumptions Are Always Pessimistic: The Medicare Edition

The projections used by the Social Security Administration to determine when it will become 'insolvent' are notoriously pessimistic, in that they have been estimating that Social Security will be DOOOMED! in 28-38 years going on nearly twenty years. Like Zeno's spear, we never seem to hit that wall. Well, it's spread to Medicare (like E. coli O104:H4! ZOMG!!). Jared Bernstein lays out the past twenty one years of Medicare* estimates for us:


Just to make this clearer--because I like helping!--I've made a couple of changes:


If we take this year's prediction seriously--or at least consider it the lower bound--then many more predictions will turn out to be wrong too. The real crisis that faces us is not a deficit decades from now, but the awful, miserable employment deficit we face today.

The stupid, it burns.

*Medicare is the program that provides health insurance for the elderly. Actually, Medicare is divided into four parts, and only one part (albeit the largest) is in 'trouble.' Supposedly.

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Was there some change in either law or methodology around 1997? The series looks reasonably stable up to that point--moving out or in a few years depending on economic conditions--but after that it becomes very noisy, as if the sensitivity to economic assumptions went way up.

Just looking at the last three years tells me this forecast has minimal value. The economy was a little better in 2010 than in 2009, but not much, and a little worse in 2011 than 2010, but not much. Yet the projected year of insolvency went from 2017 to 2029 to 2024 during those three years. That suggests to me that focusing on the deficit rather than unemployment rate now may have the effect of pushing Medicare's insolvency even sooner, the exact opposite effect to what the so-called deficit hawks claim.

By Eric Lund (not verified) on 17 Jun 2011 #permalink

These are not estimates, they are not predictions, they are projections, based upon unreasonable assumptions.

I do not think that they are meaningless, but their significance does not lie in what they apparently say. The latest projected time to "insolvency" is 13 years, which is about average. IOW, nothing to worry about at all.