This is the Kato Daily Podcast for Friday, May 3rd, 2004. I'm Caleb Brown.

Medicare is a program that's got big problems.

And Medicare's big problems are big problems for

taxpayers as well as any consumer of health care in the United States and the

clock is ticking. I sat down this week with Brian Blaze of Paragon Health Institute and Cato's Michael Cannon

to lay out the problematic policies and politics of Medicare. fiscal position. Medicare is the number one challenge that the federal government faces.

Its cost growth is on an unsustainable trajectory.

And you know, it's increasingly adding to the national debt so there are dedicated

funding sources for Medicare people pay payroll taxes for part A which is the hospital. Insurance component of Medicare, they pay premiums for

Parts B, which are for physician services and for Part D, which is the prescription drug component.

But those pieces, the premiums and payroll taxes are declining

as a percentage of total expenditures. So Medicare is increasingly reliant on general revenue and of course given the large

deficits that the country is facing Medicare's growth is adding to our

deficit challenges. If you don't mind drilling down on that, the disconnect between the dedicated funding sources

and the size of the program, what are we looking at in the years ahead?

Part A, the hospital insurance component is funded by a payroll tax.

The payroll tax historically has covered expenditures, but in the past few years expenditures

exceed revenues. So we are decreasing what's called the trust fund. The trust fund is really fiction. There is no money in the trust fund.

But when that sort of fictional account reaches insolvency, there'll be large benefit cuts. That is projected to happen within the next five to ten years.

Medicare, in part because of the aging of the baby boomers, in part because of the growth of health care spending generally

to over a trillion dollar program now it's projected to roughly double over the next

decade and of the growth, most of it is not going to be funded by those

...