Health Insurance

I apologize for irregular postings but was deployed by the American Red Cross almost two weeks ago to Florida to help provide disaster assistance from flooding after tropical storm Debbie.


It seems to me…

History suggests that attempts to privatize Medicare by relying on private companies to offer Medicare benefits in rural America simply will not work.”  ~ Bennie Thompson.

Together, Medicaid and Medicare – the programs providing health insurance to low-income households and the elderly, respectively – now account for 35 percent of total healthcare spending in theUSA.  Since their creation in 1965, both programs have expanded markedly.  Medicaid now serves 16 percent of all Americans, compared with 2 percent at its inception; Medicare now serves 15 percent of the population, up from 10 percent in 1966.  As more Americans receive benefits and as healthcare costs continue to outstrip GDP growth, total spending for the two entitlement programs is accelerating.  Over the last decade alone, Medicaid spending has doubled in real terms, with total program costs running at $273 billion in F2010.  Over the last 43 years, real Medicare spending per beneficiary has risen 25 times, driving program costs well above original projections.  Medicare spending in 2011 exceeded related revenues by $272 billion.

Medicare’s hospital insurance program is similar to Social Security in that revenue paid into the program is invested into a trust fund to help pay future benefits.  The program’s supplemental insurance program, however, is paid for out of the general fund.  Instead of putting surplus money away to pay for future retiree health care, the Bush administration chose to use Medicare and hospital insurance surpluses to pay for tax cuts.  Most of those tax cuts went to people with incomes over $200,000 per year.  While the tax cuts were ill-advised for numerous reasons, the resulting deficits now are being used to justify program reductions.

For recipients in traditional Medicare, the government pays directly for each covered medical service you receive.  For recipients in a Medicare Advantage private plan, the government pays a set annual amount for the care received.

Numerous changes to Medicare[i] have been proposed but only a few of them will be mentioned here.

Republicans have proposed changing benefits to a voucher system where everyone could make their own decisions about what type of insurance to purchase.  Any additional costs over the voucher would be paid by the recipient.  This would limit budget expenses and provide insurance choice flexibility.  Medicare already provides this type of choice through Medicare Advantage and Part D drug programs but competitive programs have not resulted in projected cost savings.  The amount allocated would not be sufficient to fully cover expenses in future years, especially for those individuals with medical problems insurance companies are reluctant to cover.

Eligibility for Medicare always has been 65 except for people with disabilities.  It has been proposed to make the eligibility age for Medicare the same as for Social Security which will increase to 67 for full retirement by 2027.  This would decrease expenditures by about 5 percent over the next 20 years.  The downside is this would increase premiums since there would be fewer people to cover the costs.  Employer health plans and costs to uninsured people also would increase.

Medicare Part A is funded by a payroll tax – 1.45 percent for employees and employers, 2.9 percent for those that are self-employed.  While everyone, in general, favors lower taxes, increasing this tax by 0.5 percent for everyone would be more than sufficient to cover any projected future deficits.

Another proposal would raise Medicare premiums for individuals with higher incomes.  Most people pay for Part B coverage which covers doctor’s services and outpatient care and for Part D which covers prescription drugs through monthly premiums which only cover about 25 percent of these service’ costs with the remaining 75 percent coming from general tax revenues.  (Individuals with an annual income over $85,000 or couples with an income over $170,000 pay a higher premium.)  Increasing the percentage paid by wealthier individuals or lowering the income level when the higher premium starts would help finance the program but also might result in wealthier individuals choosing to leave the system increasing costs for everyone else.

Restricting what can be covered by private supplementary insurance, so-called medigap, plans, which about 18 percent of Medicare recipients purchase, would increase the cost for medical services for those individuals with those plans possibly discouraging people from unnecessary medical procedures and treatment but there is no evidence of inappropriate use by this group.

Traditional Medicare Parts A and B currently have different co-pays and deductibles.  Combining the programs to have only a single co-pay and deductable would reduce program costs, improve financial protection, reduce the need for medigap supplementary insurance but might also increase overall costs for those requiring long-term hospital care.

There currently are not any Medicare co-pays for some services such as home healthcare, the first 20 days in a skilled nursing facility, or laboratory services (e.g., blood and diagnostic tests).  Requiring co-pays for these services might discourage some misuse but also significantly increase individual costs for those least able to afford them.

Medicare’s Hospital Insurance Trust Fund has sufficient resources to maintain benefits through 2024[ii].  Even if no changes are made, there will still be sufficient assets to continue benefit payments at about 75 percent of current levels.  While their might not be any immediate need for change, the longer changes are delayed, the more severe adjustments will have to be.  Given the current inability of Congress to reach agreement on any issue, if they do not begin to address this issue now, it will become increasingly difficult the longer they delay.

That’s what I think, what about you?


[i] Barry, Patricia.  Retooling Medicare, AARP Bulletin, June 2012, pp8-12.

[ii] Armstrong, Drew, and Brian Faler.  Medicare, Social Security Funds Expiring Sooner, U.S. Says, Bloomberg BusinessWeek, http://www.businessweek.com/news/2011-05-13/medicare-social-security-funds-expiring-sooner-u-s-says.html, 13 May 2011.

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About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
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14 Responses to Health Insurance

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    • lewbornmann says:

      Thank you. I apologize for taking this long to reply to your comment but am active in disaster response and this has been a very busy summer: floods, a hurricane, and numerous wildfires.

      While what I normally post is primarily of interest to me and a way to form a better opinion about some subject, it always is nice to know someone else believes those comments to be beneficial.

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  3. this pricing system is highly inefficient and is a major cause of rising health care costs. Health care costs in the United States vary enormously between plans and geographical regions, even when input costs are fairly similar, and rise very quickly. Health care costs have risen faster than economic growth at least since the 1970s. Public health insurance programs typically have more bargaining power as a result of their greater size and typically pay less for medical services than private plans, leading to slower cost growth, but the overall trend in health care prices have led public programs’ costs to grow at an rapid pace as well.

    • lewbornmann says:

      I apologize for taking so long to respond to your comment but this has been a very busy summer…

      Again, as in your other posting, I agree with what you have said. While not wishing to debate the benefits of public verse private programs, I support some form of single-payer medical care funded from a single insurance pool preferably administered by the state. Though a single-payer program is not the same as universal health care (it is possible to have either without the other), I also support the concept of universal care. There are many quite successful examples in other countries of single-payer universal healthcare plans covering entire nations financed from a pool to which many parties — employees, employers, and the state — contribute.

      Single-payer health insurance systems collect all medical fees and then pay for all services through a “single” government (or government-related) source. They may contract for healthcare services from private organizations (as in Canada) or may own and employ healthcare resources and personnel (as in the UK). The term “single-payer” thus only describes the funding mechanism—referring to healthcare financed by a single public body from a single fund and does not specify the type of delivery or for whom doctors work. Although the fund holder is usually the state, some forms of single-payer programs use a mixed public-private system.

      It is difficult to understand how any supposedly advanced society can not be sufficiently compassionate as to not provide some form of universal healthcare for all of its citizens. For those unable to afford healthcare insurance, society should be the provider of last resort.

      I expressed my opinion on this in a blog back in April (https://lewbornmann.wordpress.com/2012/03/19/healthcare-reform-2/). Switching to a single-payer universal healthcare plan is the only way we will be able to get our rising healthcare costs under control. I’ll credit conservatives for many portions of this type of program but it is time to move beyond purely politically-motivated ideology and implement a plan beneficial to our country.

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    • lewbornmann says:

      Thank you. I apologize for taking so long to reply to your comment but this has been a very busy summer for disaster response volunteers. Flooding in Florida from tropic storm Debbie, Hurricane Isaac along the Gulf, and multiple wildfires here in northeastern California.

      While I always try to check my facts prior to posting my comments, interpretation of those facts is subject to the opinion of the writer. While you state you would not actually want to disagree with me, I do not pretend to have all the answers and welcome opinions divergent from mine. Only through open discourse are each of us able to learn.

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    • lewbornmann says:

      Thank you. I apologize for taking so long to respond to your comments but this has been a very busy summer requiring a number of disaster-related responses to flooding in Florida, hurricanes along the Gulf Coast, and wildfires here in northeastern California.

      I’m always surprised (and appreciative) to receive complimentary replys to what I have written. Fortunately, without an editor or schedule, I can write about what is of interest to me. While I always try to research any facts I present, those facts are selected to support my opinion so always appreciate hearing from someone whose interpretation is different than mine. Only in this way can both of us learn.

  6. These reforms, as Peter Orszag, former director of the Office of Management and Budget, argues, may already be having a positive impact as hospitals and other providers anticipate coming changes and try to become more efficient. An August report by the CBO showed Medicare costs declining slightly in the current fiscal year. For the year ending in June 2011, while Standard & Poor’s index for commercial health insurance increased 7.5 percent, its index for Medicare costs rose only 2.5 percent.

    • lewbornmann says:

      I must admit I’m not familiar with AFE (Anglo Far-East Company) but have not been that active in the bulion market. That said, you seem much more familar with the subject than the average person that responds to my comments.

      I also apologize for taking so long to reply to your comment but this has been a very busy summer. Disaster responses to flooding, wildfires, and hurricanes seem to be the norm rather than the exception.

      the “Affordable Care Act” or ACA, contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving certain benefits, combating fraud and abuse, and initiating a major program of research and development to identify alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce Medicare costs but it is not possible to forsee what longterm affect they might have. For example, SGR (sustainable growth rate) mandated physician fee schedule payment reductions have consistently been overridden by legislative action so while payments are projected to increase roughly 1 percent slower than the Medicare Economic Index (MEI), based on past history, this might not actually occur.

      Medicare’s actual future costs are highly uncertain and likely to exceed those indicated in current-law projections. Unfortunately, the estimated exhaustion date for the HI (Hospital Insurance or Medicare Part A) trust fund remains at 2024. Total Medicare expenditures were $549 billion in 2011 and estimates are that under current law, expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and as a percentage of GDP, they will increase from 3.7 percent in 2011 to 6.7 percent by 2086. Obviously additional changes to the law will be required.

      What you said might be true but only is part of a much larger problem.

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