Retiring boomers, rising health costs are a frightening combination

History: The founding of Medicare in 1965 partially fulfilled a long-held dream of former President Harry S. Truman, who pushed for national health insurance during his administration from 1945 through early 1953. At the Medi care signing ceremony 46 years ago, then-President Lyndon B. Johnson ceremonially enrolled Truman as Medicare’s first eligible beneficiary. The goal of Medicare: providing health insurance for those receiving Social Security payments, relieving elders of some of the financial burden of paying for medical care.

The most significant legislative change to Medicare since its founding was in 2003, when President George W. Bush signed into law the Medicare Modernization Act, adding outpatient prescription drug payments and other benefits covered under the program.

The problem: Medicare today serves about 47 million Americans 65 years and older. Spending in 2011 is expected to hit $568.6 billion, according to estimates by the Congressional Budget Office.

But enrollment in the program is projected to jump about 30 percent to more than 64 million participants over the next 10 year as more baby boomers become eligible for the program. Projected annual costs will nearly double to just shy of $1 trillion in 2021.

The 2.9 percent payroll tax that employers and workers share to pay for Medicare (or 1.45 percent each) doesn’t raise enough money to cover today’s costs, so Medicare is drawing down reserves and sucking funds from elsewhere in the federal budget. The system’s main trust fund held about $278 billion as of last year, according to the Congressional Budget Office.

By 2020, the Congressional Budget Office estimates, Medicare’s main trust fund will be effectively drained, requiring a strict “pay as you go’’ system financed by payroll taxes and money squeezed from other federal programs, assuming the current structure of Medicare is kept intact. Longer-term projections point to multitrillion-dollar deficits for Medicare stretching late into the century, economists said.