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.