Reading the headlines you may think Medicare is in much better shape than previously thought. That’s not true. While the projected depletion date for the Health Insurance Trust Fund has been extended four years or sixteen years from now, that is hardly good news especially when you understand that is only because 2013 had somewhat lower spending and many tenuous changes contained in the Affordable Care Act are assumed to actually work over many years in the future.
Think of it this way. You are running a small business and revenue does not equal your expenses. You are headed for bankruptcy. To fix things you put in place a strategy to raise your prices and your sales while simultaneously cutting expenses. You convince your accountant the strategy will work as planned. As a result he informs you bankruptcy has been forestalled for about four years. Do you feel flush or are you now worried about how you will make the strategy work and what will happen in four years?
Headlines and statements such as those below are dangerous because they give cover for politicians who would rather not do what is necessary (and unpopular) to actually preserve Medicare.
Good News For Boomers: Medicare’s Hospital Trust Fund Appears Flush Until 2030 – Kaiser Health News
“Medicare is considerably stronger than it was just four years ago,” said Health and Human Services Secretary Sylvia Burwell. She noted that the recent slow growth of the program’s spending will likely mean that the Medicare Part B premium charged to beneficiaries – currently $104.90 per month – will remain the same for the third year in a row. “That’s a growth rate of zero percent,” she noted.
A growth rate of zero‼️ What politically correct nonsense‼️ As long as there is any projected date for financial shortfall, the Medicare premium should always be increased. To do otherwise is merely shifting the burden to younger Americans.
Raising the Part B premium by only $1.00 generates $627,600,000 a year. That is more than a half billion dollars that would not have to come from general revenue (and mostly from the pockets of middle class Americans).
I wonder if Burwell read what was written in the Trustees report she signed? The Report calls for action with a sense of urgency and all we get is political pandering to the public.
The Part B portion of Medicare never runs out of money because between premiums and general revenue all the bills must be paid. Why wouldn’t premiums increase each year?
FROM THE TRUSTEES JUST RELEASED 2014 REPORT
Medicare’s HI Trust Fund has a long-range actuarial deficit equal to 0.87 percent of taxable payroll under the intermediate assumptions, 0.24 percentage point smaller than reported last year. This improvement is primarily due to lower projected spending for most HI service catego- ries—especially for inpatient hospitals—that reflects lower-than-expected spending in the projection base year (2013) and other recent data, lower utilization assumptions for inpatient hospitals, and lower case mix assumptions for skilled nursing facilities and home health agencies. The projected date of depletion of the HI Trust Fund is now 2030, four years later than reported last year.
Total Medicare expenditures were $583 billion in 2013. The Board projects that expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, they will increase from 3.5 percent in 2013 to 6.9 percent by 2088 (based on the projected baseline under the Trustees’ intermediate set of assumptions). Under current law, Medicare spending would represent 6.3 percent of GDP in 2088. If the reduced price increases for other health services under Medicare are not sustained and do not take full effect in the long range as in the illustrative alternative projection, then Medicare spending would instead represent roughly 8.4 percent of GDP in 2088. Growth under any of these scenarios, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.
The Trustees project that HI tax income and other dedicated revenues will fall short of HI expenditures in most future years. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.
The Part B and Part D accounts in the SMI trust fund are adequately financed because premium and general revenue income are reset each year to cover expected costs. Such financing, however, would have to increase faster than the economy to cover expected expenditure growth.
The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future. The sooner solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior.
The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address the depletion of the HI trust fund and the projected growth in HI (Part A) and SMI (Parts B and D) expenditures.