Like I said, every few years, politicians run around saying how we need to Save Medicare. This has been a recurring theme for most of Medicare's existance. If it worked, it wouldn't need saving. They "saved" it in 1990, again in 1997, and they're trying to "save" it again.

My wife is the clinical nurse manager for an outpatient surgery center. She has told me many times of the problems with the Medicare system, such as how Congress keeps cutting the payments (to "save Medicare"), the slow payments causing cash flow problems, the bureaucracy, and the waste in the system.

Medicare expenses have grown far faster than projected and that puts a strain on the system. Go ask a bunch of senior citizens how easy it is to find a doctor who will accept new Medicare patients. Most people have no idea how expensive it is to run a medical practice, yet the money doctors get paid to treat Medicare patients stays constant or even goes down. It's even worse for Medicaid - the doctors where my wife works are expected to treat Medicaid patients for free and to absorb all their office expenses (labor, facility, materials, malpractice insurance insurance, utilities, etc.) out of pocket.

Medicare is being squeezed due to several factors. These include:

1. An aging and longer living population that requires more medical care, and more expensive care. There's also pressure to expand the existing coverage to cover expensive items like prescription drugs.

2. A rapidly increasing population dependent on Medicare. The "over 65" segment of the population is rapidly growing. In just a few years (2010), the opening wave of the Baby Boomers will hit Medicare age. That will expand the Medicare rolls by roughly 2 million people a year for many years to come.

3. A decreasing base of people paying in to the system as more people hit retirement age. Following the Baby Boom was the Baby Bust, where the population growth rate dropped rapidly.

Some people say that "demographics is destiny." While some argue with the point, the trends over the next 20 years don't look good for Medicare. The Medicare Tax is already 6.2% of income and it's a flat tax. If the trends continue as forecast, that will no doubt have to increase substancially to pay the rising costs with a smaller worker base.

Here is a link to some CBO numbers on both Medicare and Social Security. From this source, Medicare was 11% of the federal budget in FY2002 ($223 billion) and is rising. Look at the chart from this source and you can see how fast Medicare spending has grown. In 1980, the total Medicare budget was $36.3 billion. Factoring in inflation, that would be $80.66 billion in 2003 dollars, only about 1/3rd of the current Medicare budget. Even Bush wants to expand the Medicare budget by some $400 billion over the next 10 years to pay for the prescription drug benefit.