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Is Medicare More Solvent?

The Medicare trustees recently announced that Medicare should be solvent for a couple of extra years. They tied new estimates to an improving economy and a slowdown in the rising cost of health care. Different media sources that carried the message added some interesting slants.  Here’s what some of the media said about the extension.

How Spending Has Been Reduced

USA Today and the Washington Post covered the extension on the front page citing a reduction in health-care costs. They reported spending did not live up to projections in most categories, including skilled nursing facility care.  The Wall Street Journal credited the Affordable Care Act (ACA) with extending Medicare and also mentioned less spending at skilled-nursing facilities.

Both the Post and the Journal noted that the ACA limited Medicare Advantage plan spending and that was more effective than expected. Although it’s somewhat controversial, Advantage plans are now rated with five stars indicating peak performance. Five-star plans get bigger federal subsidies and are allowed to sell coverage outside of the annual open enrollment from October 15 through December 7.

USA Today carried comments from the Health and Human Services Secretary Sebelius. She said savings came from fewer hospital readmissions. Penalties have been introduced to encourage hospital staff to release patients with extra care so they don’t have to come back right away.

Sebelius also said addressing fraud and reducing payments to health-care providers had improved the outlook for Medicare without cutting coverage for patients.  An American Health Care Association spokesman agreed that their members had seen fewer hospital discharges into skilled nursing centers and fewer hospital readmissions.

Why I’m Skeptical

The Los Angeles Times was skeptical of the good news. They warned that earned-benefit programs, like Medicare and Social Security, were not sustainable and I agree.  In just 13 years, 2026, we still have a serious situation on our hands.  It’s urgent that we fix Medicare.

There are a total of six trustees.  Four are public officials and two are public representatives.  The trustees credited lower than projected spending for extending Medicare, and their last report projects the Medicare hospital fund will be exhausted in 2026.  That’s two years beyond the estimate from last year.

The projection for Social Security hasn’t changed since last year.  The Trustees project it will be depleted by 2033.  That wouldn’t stop benefits completely because Social Security and Medicare are funded through payroll taxes that could continue to be collected.

In an appendix, Medicare acting chief actuary Paul Spitalnic added that future costs could be higher than the report indicated.  He pointed to laws that would require almost a 25-percent reduction in what Medicare pays doctors next January 1, and that’s implausible.

Why We Should Fix Medicare and Social Security

The number of Medicare beneficiaries is expected to grow to 73 million by 2025.  We have 52 million Medicare beneficiaries now.  Social Security provides benefits to more than 57 million people, with an average of about 10,000 baby boomers becoming eligible every day.  The standard Medicare premium in 2013 was $104.90 a month and it’s expected to stay at the same level next year.

Unfortunately, the longer we put off dealing with the funding challenges, the worse off future beneficiaries will be.  Without question, the current system is unsustainable.

Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage. For more information visit www.MediGapAdvisors.com.

 

 
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