Question

Saving a nation health insurance plan (ECON 365)

Well , increasing taxes proved even more unpopular than you could have imagined, and you were force to lower them again to $1000 per year on each of the young. Ever resourceful, you hit upon another strategy- invest the trust fund in the stock market. You are confident that with the right investment, you can earn 10% per year on the trust fund and save Medisure. Will the Medisure trust fund ever go bankrupt now? If so, when? Assume that you are starting over in 2020.

Answer 1

While investing the Medisure trust fund in the stock market at a 10% annual rate might offer a strategy to avoid bankruptcy, it's not guaranteed due to variables like healthcare cost inflation and market performance.

Step-by-step explanation:

The question pertains to investing the Medisure trust fund in the stock market to achieve a 10% annual return and thereby prevent the fund from going bankrupt. Based on the information provided, the Medisure trust fund is a part of the Medicare system, which has been facing financial challenges.

With the escalating costs of healthcare and the addition of new benefits, the Medicare trust fund has been forecasted to deplete its resources. Various proposals have been suggested to salvage the program such as increasing taxes, raising the retirement age, and reducing payouts.

These proposals, unfortunately, have not been widely accepted, leading to the exploration of investment strategies.

However, even with an optimistic 10% annual return on investing in the stock market, it cannot be definitively said that the trust fund will never go bankrupt.

The future of the trust fund also depends on numerous variables, such as healthcare cost inflation, demographic shifts, and stock market performance. These factors need to be carefully evaluated to determine the sustainability of the Medicare trust fund over time.