Happy Birthday, Medicare!

Medicare celebrates its fiftieth birthday this year.  What’s in the future for this program, given the scrutiny being applied recently to Social Security, Medicaid and Medicare?  

The American Academy of Actuaries, which also turned the big five-oh this summer, released three of its Medicare@50 series of papers, described as a “Cliffs Notes version for ‘actuarial analyses of public policy issues.’”

In the first paper, “Is it Sustainable for 50 More Years?” the Academy points out that the baby boomers outnumber the current and projected working population, so that fewer workers will be paying into the system to support the growing number of retirees. In 1980, there were four workers for every Medicare beneficiary; by 2040 that ratio is expected to fall to about two workers for every beneficiary.

If and when that happens, the benefit payments are expected to exceed payroll taxes, threatening the solvency of the Hospital Insurance (HI) trust fund, which primarily pays for inpatient hospital and post-acute care services. Assets in the HI trust fund are projected to be depleted by 2030; the Academy notes that “Bringing the trust fund back into balance will require cuts in program spending, increased funding, or some combination of the two.”

In the second paper, “Who are the Beneficiaries?” Medicare is touted as “not a one-size-fits-all program.” Besides those beneficiaries who have just turned 65, there are younger individuals with permanent disabilities, individuals diagnosed with end-stage renal disease or amyotrophic lateral sclerosis, and “dual eligible” – those with low incomes who are also eligible for Medicaid.

Medicare spending varies. On average it is higher for disabled beneficiaries than healthier beneficiaries aged 65 and older and for dual eligibles than for non-dual eligibles, the Academy reported.  Here are more statistics from this paper:

  • The most costly 5 percent of Medicare’s traditional fee-for-service (FFS) program beneficiaries account for nearly 40 percent of Medicare FFS spending.
  • The most costly 25 percent of beneficiaries account for over 80 percent of spending.
  • The least costly 50 percent of beneficiaries account for only 5 percent of spending.

It is important, the paper sums up, “to consider not just the average beneficiary, but also the entire range of beneficiaries”  when evaluating the cost of the program.

The last paper  looks at the question, “Does it Meet the Needs of the Beneficiaries?”  Since Medicare’s enactment in 1965, its fee-for-service benefit package has remained mostly unchanged; however, beneficiaries now are faced with supplemental coverage options (Part D prescription drug plans, MediGap, Medicare Advantage), which can be confusing and overwhelming.

Medicare does not cover long-term care services and supports such as skilled nursing facilities, however. Other services – vision, dental, and hearing care – are typically not covered under the traditional Medicare program either. Again, beneficiaries will need to turn to supplemental coverage options.

Another flaw in the program is that patient cost-sharing  requirements, such as deductibles, copayments, and coinsurance, do not have an annual limit or cap, as private health insurance programs do, which can leave beneficiaries unprotected against catastrophic health costs.

The Academy’s report notes that proposals have been suggested that would combine a new cost-sharing limit with a unified Part A and Part B deductible.  Also, the copayment and coinsurance requirements could be restructured.

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