Is
Medicare in a state of crisis?
According to the
Medicare Trustees report Social Security Insurance fund will be depleted in
2016. The Medicare Hospital Insurance Fund will be depleted in the year 2026.
According to the Trustees Lawmakers should address the financial challenges
facing Social Security and Medicare as soon as possible. Taking action sooner
rather than later will leave more options and more time available to phase in
changes so that the public has adequate time to prepare. (Social Security 2014)
According to an
article from Reuters Mark Miller upon exhaustion or depletion the funds
available will only cover 75% of the expenses not a complete usage of funds.
However this 75% coverage will be collected from payroll taxes and assets. It can be hard to imagine a fund that is
diminished to support payments in full.
According to dictionary.com a crisis is defined as a stage in a sequence of events at which the trend of all future events,
especially for better or for worse, is determined; turning point. (Miller 2012)
When I think about a
trust fund I think of it in two ways I think of trust funds as either a source
of supplemental income or as a primary source of income. In the case of elderly
people with no other form of income I think of Medicare as the sole provider of
payment as such a depletion or partial depletion of a fund that pays out 75% of
the coverage is a critical issue.
Are
radical measures necessary to preserve the program?
There are ways that Medicare
trust fund issues can be fixed by Increasing the social security tax, lifting
the payroll tax cap, raising the retirement age, or reduce the beneficiaries by
having a means test. (Brandon 2013)
There are an estimated 174
million persons in the United States with private health insurance 41.7 million
with Medicare and 42.5 million people with Medicaid insurance according to the
CMS. The total amount paid in 2012 for CMS was $993.7 Billion while out of
pocket and private insurance paid out $1.2 Trillion. (CMS 2012) Radical Changes are needed due to the amount
of coverage utilized. In the worst case scenario it can be easy to imagine a
population of 41 million without healthcare.
A majority of the population with no real ability to make an income or
better yet more than half of the current Medicare enrollees are between the
ages of 65 and 74, the older segments of the population are growing the
individuals over the age of 85 account for a little above 10% of the
population, but their use of the Medicare services and overall impact on the
program are substantial. (Umas 2014)
How
is Medicare funded now?
Medicare
is funded by two trust funds, the Hospital Insurance Trust Fund. The Hospital
Trust Fund is funded by payroll taxes paid by most employees, employers and
people who are self-employed. Other sources include income taxes paid on Social
Security benefits, interest earned on the trust fund investments, and Medicare
Part A premiums from people who aren’t eligible for premium-free Part A.
Because of how the Medicare Hospital Trust Fund is funded by payroll taxes it
can be logical for the elderly to come to the conclusion that they have paid
for their Medicare benefits versus being on a welfare system.
The
Supplementary Medical Insurance Trust Fund is funded by funds from Congress,
and by premiums from people enrolled in Medicare Part B (Medical Insurance) and
Medicare prescription drug coverage (Part D). Some of the other sources of
funds are interest earned on the trust fund investments. (CMS 2013)
Why do elderly people feel that Medicare
is an insurance program and not a welfare program? Is this perception accurate?
Because
Medicare is supported by paying into the system this is money that has been set
aside versus money that is just given away. According to Merriam Webster
welfare is defined as: a government program for poor or unemployed people that
helps pay for their food, housing, medical costs, etc. Much in the same way
that private insurance is paid for with premiums could be perceived as
insurance however, through the payroll tax currently at 6.2% and caps makes
Medicare cheaper than other health insurance premiums. When dealing with
perceptions it depends on where the perspective comes from. If one has been
paying about 6.2% of their payroll in a private investment fund with gaining
interest one could expect to see significant returns, possibly more than enough
to cover healthcare beyond the age of 65. (SSA 2014)
Should there be a Medicare program at
all? Why
should the government be involved in providing insurance to elderly people?
In 1963 Lyndon B. Johnson
wanted to add adequate protection for the aged against the cost of health care.
The problem was that health cost increase greatly in old age, when at the same
time, income almost always declines. Prior to Medicare, only a little over one
half of those aged 65 and over had some type of hospital insurance; few among
the insured group had insurance covering any part of their surgical and out of
hospital physicians’ cost. Also, there
were numerous instances where private insurance companies were terminating
health policy. Estimates put the first year enrollee numbers at 19 million.
In
1965 Medicare and Medicaid were enacted as Title XVIII and Title XIX of the
Social Security Act, extending health coverage to almost all Americans aged 65
or older and providing health care services to low-income children deprived of
parental support, their caretaker relatives, the elderly, the blind, and
individuals with disabilities. Seniors were the population group most likely to
be living in poverty; about half had insurance coverage. (CMS 2012)
Until
2003 President George W. Bush signed into law the Medicare Modernization Act in
2003. (SSA 2014) The Medicare Prescription and Modernization Act (MMA) made the
most significant changes to Medicare since the program began. MMA creates a
prescription drug discount card until 2006, allows for competition among
healthcare plans to foster innovation and flexibility in coverage, covers new
preventative benefits, and makes numerous other changes. In 2006, the new
voluntary Part D outpatient prescription drug benefit will be available to
beneficiaries from private drug plans as well as Medicare Advantage plans.
Employers who provide retiree drug coverage comparable to Medicare’s will be
eligible for a federal subsidy.
Does
Medicare have detrimental effects on the market for healthcare or on the market
for health insurance?
A 1992 study in the Journal of the American Medical Association examined hospitalizations in Massachusetts
and Maryland. The study found that Medicaid and uninsured patients were
statistically more likely than privately insured patients to be hospitalized
for avoidable conditions such as pneumonia and diabetes. (Dayaratna 2012)
Today there are plenty of
news articles highlighting the uninsured figures. Some of the research has
estimates at 47 Million persons in the United States without insurance. Not having Medicare in place would add an additional
41 million to the uninsured numbers. (PBS
2008)
Are
these economic effects, offset by the positive effects of the Medicare program
for the elderly? What about the positive effects of caring for the elderly for
society?
According
to the Heritage Foundation article titled Studies Show: Medicaid Patients Have
Worse Access and Outcomes than the Privately Insured
A
2007 study in Health Affairs examined access to specialty services for patients
who receive primary care from community health centers.[14] The study found
that Medicaid recipients have significantly more difficulty accessing specialty
care than privately insured patients.
A
2012 study in Health Affairs examined physicians’ willingness to accept new
patients. Using survey data from a nationally representative sample, the study
found that nearly one-third of physicians nationwide will not accept new
Medicaid patients. Doctors in smaller practices, as well as doctors in
metropolitan areas, are among the least inclined to accept new Medicaid patients.[15]
The authors’ results suggest that this reluctance may largely be a consequence
of Medicaid’s poor payment rates to doctors. (Dayaratna 2012)
It can be easy to draw the conclusion that healthcare
insurance versus not having health insurance results in a lower quality of
health while having private health insurance is better than having our Medicaid
or Medicare.
Are there any externalities here?
Some
of the externalities or side effects from Medicare might be lower payment
reimbursements, and lower quality of service. With a population of 41 million they
have the ability to affect the market with the types of services they require.
Based on the way that Medicare is funded I would think of this program as a
positive benefit because they are helping a population by having the same
population pay into the program usually before using the benefits.
References
Brandon,
Emily (2013) 5 Ways to Fix Social
Security, US News Retrieved from
Centers
for Medicare and Medicaid Services (2012) National Health Expenditures Table
Centers
for Medicare and Medicaid Services (2012) About
Dayaratna,
Kevin (2012) Studies Show: Medicaid Patients Have Worse Access and
Eskow,
Richard (2012) Social Security and
Medicare: Six Myths Debunked Crooks and
Miller,
Mark (2012) Is Social Security Really,
“Exhausted?” Not at all, Reuters Retrieved
Public
Broadcasting Station (2008). Critical
Condition. Retrieved from: PBS Website
Social
Security (2014) Trustees Report Summary, Retrieved from
Umas,
Ben (2014) Medicare Benefit Population
AARP Retrieved from
http://assets.aarp.org/rgcenter/health/fs149_medicare.pdf
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