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The Treasury Department's general fund subsidizes Medicare by anamount equal to about 1.3 percent of GDP, a large but manageablesum and an apparently sustainable level of support. It faces excesscosts of $85.6 trillion. Medicare reform needs a clear goal forsustainability. Eliminating all of Medicare's excess costs might beideal, but that would be more than is necessary to achievesustainability.
Medicare is a vital program for seniors, but is fundamentally unaffordable as it is currently structured because it faces an unfunded obligation of $85.6 trillion. Phasing out the subsidy forupper-income seniors is an obvious first step toward Medicaresustainability. Such a policy would reduce Medicare's long-runexcess costs by over $41 trillion.
Medicare is financially unsustainable in its current form. TheMedicare Trustees' 2008 estimate of the program's total excess costs is $85.6 trillion. The Trustees acknowledge an important,flawed assumption used in developing their estimate of excesscosts. If corrected, Medicare's excess costs would increase,underscoring the need to reform Medicare quickly and substantially.