Final answer:
Medicare faces potential bankruptcy as the baby boomers retire because payroll taxes won't meet the increased expenses due to a larger aging population, higher demands for healthcare, and medical advancements, potentially leading to large budget deficits unless changes are made.
Step-by-step explanation:
Medicare is expected to eventually become bankrupt as the baby boomers retire because the current level of payroll taxes that support Social Security and Medicare will fall well short of the projected expenses of these programs. The aging baby boomer population, consisting of approximately 74 million people, has recently entered retirement age. This results in a major demographic shift with a substantial increase in the number of Americans over the age of 65, escalating healthcare demands due to common health issues like heart conditions, arthritis, and Alzheimer's. Additionally, advancements in medical technology and policies like the Affordable Care Act are increasing the longevity and demand for healthcare which, in turn, causes a rise in Medicare expenses.
These factors contribute to a forecast of large budget deficits unless changes are made, such as increasing the revenue to support these programs or decreasing the benefit levels. Strategies to prevent bankruptcy may include altering retirement ages, modifying Medicare benefits, dramatically cutting other spending, or allowing the federal government to run extremely large budget deficits.