Posted on 01/28/2025 8:26:55 AM PST by george76
The program is not insolvent, but there’s a growing gap between revenue and expenses. Changing demographics are one big reason..
Medicare has a money problem. Or it will in about 10 years. It’s the sort of problem Dwight Eisenhower might have called important but not urgent, like a balloon payment on a mortgage or a roof that only leaks once in a while. Such problems are easy to ignore until it’s too late to fix them.
Yet anything costing $1 trillion a year will inevitably become urgent soon enough, and Medicare’s funding shortfall will demand attention and action by 2036 to prevent a crisis.
That’s when the Hospital Insurance (HI) Trust Fund, which pays hospital bills for 68 million Americans, will be depleted, according to Medicare’s trustees. After that, the annual income for Medicare Part A will fall 11 percent short of expenses. But that’s a decade away. For now, the HI Trust Fund has a surplus of more than $200 billion, according to the latest report. And Medicare Part B, which covers things such as doctor visits and diagnostic tests, had reserves of over $180 billion.
Medicare is not insolvent, but there is an increasingly large gap between the revenue generated by the program and its total expenses. And that requires an increasingly large transfer of cash from the U.S. Treasury to make the program work.
In 2023, revenue coming into Medicare through payroll taxes, premiums, and interest covered about 57 percent of the program’s expenses. The other 43 percent, about $43 billion, had to be paid from the government’s general fund. This gap between income and expenses has always existed, but it’s growing rapidly. By 2053, the general fund will have to cover fully half of program costs.
President Donald Trump, like former President Joe Biden before him, has promised to protect Medicare, though neither articulated a plan for doing so.
Medicare, which will have its 60th birthday in July, chugged along for decades without attracting much attention. Why is it now falling further and further behind expenses?
That’s partly due to the way Medicare was designed, and it’s partly a result of changing demographics, American innovation, and decisions that were made along the way.
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It’s Not a Business..
Medicare provides medical care for people who are age 65 and older, or disabled, or have end-state renal disease or ALS, also known as Lou Gehrig’s disease.
Medicare is called an insurance program but it wasn’t designed to be fully self-sustaining. It has always operated more like a federally subsidized health payment program.
Medicare Part A, which pays for hospitalization, is the most like traditional insurance and the closest to being financially stable. The lion’s share of funding for Part A comes from a 2.9 percent payroll tax. The rest comes from a tax on Social Security benefits, interest on the fund balance, and premiums paid by some beneficiaries.
It’s a mistake to think of the HI Trust Fund as an endowment or a pension, according to Jon Kingsdale, an adjunct associate professor of health care policy at Brown University.
“It’s simply like a checking account, which is filled up by payroll taxes throughout the year and is drawn down by spending for hospitals and nursing homes and other facilities,” Kingsdale told The Epoch Times.
Like a checking account, the HI Trust Fund can reach a zero balance. The trustees predict that will happen in 2036. After that, the income it receives will cover only about 89 percent of Part A obligations.
Medicare Part B is a little different. Its expenses are paid through the Medicare Supplemental Medical Insurance (SMI) Trust Fund, as are expenses for Medicare Part D, prescription drug coverage.
People who qualify for Medicare can opt into Parts B and D by paying a premium. Part B also receives some income from interest on the fund balance, and states contribute to support Part D.
But that income covers only a fraction of the expenses. More than 70 percent of the funding for the SMI Trust fund comes from the general budget. Every year, Congress estimates upcoming expenses, then adds money to cover the gap.
Increases in premiums have not kept pace with expenses, so the share paid by the general fund has grown larger.
When the HI Trust Fund is depleted, it will cause an urgent problem because the government currently has no legal mechanism for adding more money to it. But the larger issue is that the primary funding sources for Medicare are not keeping pace with rising costs, requiring the government to pay a larger and larger share of the nation’s wealth to keep the program going.
Medicare now consumes about 3.8 percent of the country’s gross domestic product, the total value of all goods and services produced. By 2048 it will be 5.8 percent, according to the Medicare trustees.
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Three main factors are driving that.
Demographics, Innovation, Medicare Advantage..
Two population events coincided in the 20th century that resulted in financial pressure on Medicare. First, the 76 million baby boomers who were born between 1946 and 1964. They started to retire in 2011. That caused Medicare enrollment, which had been growing by about 500,000 a year, to add 1.3 million beneficiaries a year for the next 14 years.
Additionally, long before the baby boomers signed up for Medicare, the birth rate fell significantly. Americans have gone from having 123 births per 1,000 women aged 15 to 44 at the height of the baby boom to having 56.1 births per 1,000 by 2022.
Taken together, those events created a situation in which fewer workers are paying the Medicare payroll tax compared with the number of people receiving benefits. When the program was created in 1965, the ratio of workers to beneficiaries was 4 to 1. Today it’s 2.8 to 1 and will continue to decrease through 2040.
The rise in obesity, addiction, diabetes, and other chronic illnesses costs all Americans, including Medicare beneficiaries, more now. Americans spent about $8,500 per person, adjusted for inflation, on health care in 2000. Today the amount is more than $14,500.
The second factor in the cost of Medicare is innovation in the health care industry. Medicare pays for far more diagnostic tools and treatments than it did in 1965, including things such as CT scans, MRIs, and joint replacement surgery. But the biggest recent cost increase has come from prescription drugs, which were not covered by Medicare until 2006. By 2022, prescription drugs accounted for 14 percent of all Medicare spending.
A third factor is Medicare Part C, or Medicare Advantage. That’s an optional program started in 1997 to allow private insurance companies to manage benefits for Medicare beneficiaries.
People who opt into Medicare Advantage continue to pay their Part B premium to Medicare. Then the government pays the insurer a lump sum to pay for their treatment. An analysis by KFF, a health policy research group, found that Medicare Advantage cost $321 per year more per enrolled beneficiary than traditional Medicare did in 2019. That amounted to $7 billion.
Now, more than half of Medicare’s 68 million beneficiaries are enrolled in Medicare Advantage plans.
What Now?
The Medicare trustees reported to Congress in May 2024 that Medicare spending was nearing a critical point. It was the seventh consecutive year the trustees issued that warning. They also called for action.
“There is no provision under current law to finance projected long-range HI deficits,” they wrote. “The trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior.”
That seems to suggest the possibility of either a tax increase or a cut in benefits. Neither option seems likely in the short term, though there could be other approaches to solving the problem.
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“There are many, many areas of fraud, waste and abuse. The government is too large. The agencies are too many,” Johnson said, before mentioning the newly created Department of Government Efficiency (DOGE) headed by Elon Musk.
Musk has said DOGE might be able to cut $2 trillion in federal spending, nearly one-third of the budget, which would free more tax dollars to fund Medicare.
Some observers doubt that savings within the program itself will be enough to right the ship. “We’re already, frankly, paying at a rate that’s well below what commercial health plans pay,” Kingsdale said.
As for cutting the fat from the Centers for Medicare and Medicaid Services; it employs about 6,700 people, less than half the number employed by Congress. Most of the work in Medicare is done by contractors.
As the Medicare trustees put it, the looming deficit “is large enough that averting trust fund depletion under current-law financing is extremely unlikely.”
A significant change in public health could reduce demand for medical services and Medicare costs along with it. If successful, the Trump administration’s Make America Healthy Again initiative, driven by Robert F. Keennedy Jr., and that aims to reduce the rate of chronic illness among Americans, could benefit the Medicare system within a few years.
Failing those solutions, few options remain: increasing taxes, raising the age of eligibility for Medicare, or reducing benefits.
“Each of those three is extremely painful,” Kingsdale said.
36 trillion dollars in debt and 100s of trillions in unfunded liabilities say the whole damn nation is broke.
Medicare Part B
$100 doctor bill
$20 patient co-pay
$20 covered by Part B premiums
$60 balance paid via taxation
doctor pays ~40% marginal 1040 rate
staffers pay ~27% marginal rate
~$33 paid via doctor office earned income taxation
~$27 paid by outside party taxation, including that of corporations
Don’t worry. I’m sure the Ukrainians will be grateful we spent a ton of money on them. Likewise the windmills and EV chargers. Etc.
IF you saw all the different things different states have padded into MEDICARE-—YOU WOULD CHOKE.
Calif:
RENT $$
DOWN PAYMENT ON A HOUSE $$$
FOOD $$$
Many items that have ZERO to do with MEDICAL coverages.
Part A is the hospital portion. It pays for hospital rooms, hospital equipment, post-operation nursing care.
How much should we pay for a clean operating room for a few hours?
How much should we pay for the rental of a heart bypass machine?
How much should we pay for the rental of a heart monitor?
How much should we pay for three hours of operating room nurse time?
Note: The surgeon and the anesthesiologist are paid for by Part B.
How much should we pay for:
1. a clean room, per day? per sanitization?
2. the daily use of a shared oxygen supply system,
3. the daily rental of a bed,
4. the daily rental of an IV drip machine,
5. the hourly rate of a hospitalist,
6. an hour of the care of two physical therapists,
7. and a few hours of a nurse’s time?
Obamacare robbed money from Medicare to expand Medicaid.
Medicare spends about $20 billion a year on blood thinners.
There are no real funds. There is no actual money. What we are talking about is future gov’t revenue. A slice of the pie which will be baked later.
How so? It is my observation that a $100 Dr. bill is cut to an eventual $10 payment by "the advantage plan." And Docs are on salary, not to mention that their income taxes go for the whole shebang, not just medical subsidies.
“Insurers of qualified health plans (QHPs) sold on HealthCare.gov denied 19% of in-network claims in 2023 and 37% of out-of-network claims for a combined average of 20% of all claims.”
“Consumers rarely appeal denied claims (fewer than 1% of denied claims were appealed) and when they do, insurers usually uphold their original decision (56% of appeals were upheld).”
Wasn’t it reported that several categories of illegals/migrants were given Social Security numbers so they could work and also access to Medicare/Medicaid, thus ballooning cost?? If so, that should not be!!
“About one percent of all non-pediatric physicians have formally opted out of the Medicare program in 2024. The share was highest for psychiatrists (8.1%), followed by plastic and reconstructive surgeons (4.5%) and neurologists (3.2%).
“In 11 specialties, the share of physicians who have opted out of Medicare is 0.5% or lower, with the lowest shares seen among emergency medicine physicians (0.1%), oncologists (0.1%), radiologists (0.1%), and pathologists (<0.1%).”
https://www.kff.org/medicare/issue-brief/how-many-physicians-have-opted-out-of-the-medicare-program/
Once again, all the benefits a retired worker has paid in to is threatened by the lack of paying in workers . . . under the tables and illegals, etc
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Has anyone ever figured out their Medicare statement? The numbers never add up. And the statements show up six months after the procedure.
Why do we need Medicare?
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