Hidden amongst the Medicare Modernization Act of 2002 which brought us the prescription drug 'benefit' was a provision that seeks to put a cap on financing of Medicare. Although other federal spending, such as that for defense, education or housing, comes from general federal revenues, Medicare spending from general federal revenues is restricted to 45% of the total Medicare spending. So, if in two consecutive years there are projections that this 45% cap will be exceeded for the next six years, alternative funding sources (i.e., payroll taxes or Medicare premiums) must be sought. That situation has occurred and Bush has introduced legislation to 'correct' the funding gap.
Why Medicare has been selected as being limited in the use of general revenues is a question that may lead one to postulate that there is a move underway to attempt to privatize it. Medicare Advantage is clearly a move in that direction even though it costs between 13% and 19% more to provide benefits to patients than regular Medicare.
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