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Fact or fiction? Medicare bound for bankruptcy

Claim: The Medicare funds are being depleted, the program will it go bankrupt in several years.

Medicare is the program which pays the medical costs of 38 million Americans age 65 and older and 7.4 million disabled Americans. The average benefit per enrollee in 2008 was about $11,000, with total spending at $470 billion. About 80 percent of Medicare's funding comes from the taxpayers, either through the payroll tax or income taxes. About 12 percent of Medicare's funding comes from enrollee's premiums. About four percent comes from interest earned on special Treasury securities held by the federal government, referred to as the Medicare trust funds.

Fact or fiction?
A little of both. The Medicare trustees said last May that Medicare is unsustainable, unless spending is cut or taxes are raised. The $300 billion trust fund for Medicare Part A, which pays for hospital, hospice and home health care, will be exhausted in 2017, the trustees predicted. Once that fund is gone, tax revenues alone would have to pay for Medicare Part A. The unfunded liability for Part A is $13.4 trillion, which means if $13.4 trillion were magically added to the trust fund now, the program could meet the projected cost of expenditures over the next 75 years. To bring Part A into balance, the 2.9 percent payroll tax could be immediately increased to 6.78 percent, or spending could be cut by a corresponding amount.

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