The Goldendale Sentinel - Headlines & History since 1879

By Sandra DeMent
For the Sentinel 

Medicare: The Good, The Bad and the Ugly


From Republican President Teddy Roosevelt in 1912 to 1965, a parade of U.S. presidents worked to create a national health insurance program. When Democratic President Lyndon Johnson signed Medicare into law in 1965, older Americans finally started receiving coverage without worrying about denials due to pre-existing conditions and without the crushing cost of private insurance premiums. Today, 57 million seniors aged 65 and over are covered under Medicare. Approximately 4,300 live in Klickitat County.

As with Social Security, the Medicare program will likely be revised during this session of Congress. For the seniors in Klickitat County who rely on Medicare, the coming changes will matter very much. If the current proposals for replacing Obamacare give any clues as to the kind of changes facing Medicare, the changes will have significant, disruptive and seriously negative effects on seniors in this county, and on the doctors and hospitals they rely upon.

First some background. There are three major parts to Medicare; each part is financed differently. Part A covers 80 percent of the cost of hospital stays, paid for by the Hospital Insurance Trust. The Trust is financed by a 0.29 percent payroll tax, paid half by employers (1.45 percent) and half by employees (1.45 percent). Under the Affordable Care Act (Obamacare) employees with incomes more than $200,000 or $250,000 per couple pay a higher 2.35% tax. Obamacare also added a small tax on medical device manufacturers, such as pacemakers. While Medicare pays 80 percent of the hospital bill, patients must pay their 20 percent share of cost either directly, or by purchasing a private supplemental insurance plan.

Part B covers doctor and outpatient expenses (such as wheelchairs, therapy, etc). Part B is paid for 25 percent by a premium each covered person pays, and 75 percent by the federal government. Here too, Obamacare added a higher premium for people with incomes over $85,000/$170,000 per couple; people with lower incomes receive subsidies. Part D, which covers prescription drug costs for those who choose to enroll, is financed in the same way as Part B, with a mix of premiums and federal payments. As with Part B, higher income individuals pay higher premiums.

(Part C, Medicare Advantage, covers seniors who choose to enroll in an HMO-type plan. Instead of paying medical claims and hospital claims directly, Medicare pays the premium for these enrollees. Where HMO’s are available, the plans provide better care at less cost. Unfortunately, there are no HMO plans in Klickitat County.)

One common misunderstanding is that the Medicare pays for long-term care; it does not. Medicare will only pay for up to 100 days of nursing care or rehabilitation after a covered patient has been hospitalized for three days and the doctor determines that further care is needed. After 100 days, if a patient needs continued care and cannot pay for it, Medicaid, designed for those in need, will pick up the tab.

Medicare spent a total of $632 billion in 2015. The good news is that Medicare spends less per patient than private health insurance, and the rate of growth in spending is less for Medicare than for private health insurance. The bad news is that Medicare spending accounted for 15 percent of the federal budget in 2015 (defense spending consumed 16 percent) according to the Congressional Budget Office.

Worse, the Hospital Insurance Trust (Part A) is expected to run out of money in 2028. Current payroll tax collections won’t be enough to cover current expenses, and there will be no reserves left in the Trust. Originally, the Trust was expected to run out of money in 2017, but the additional taxes on higher income individuals under Obamacare pushed the date out to 2028. If those provisions of Obamacare are repealed, Medicare’s situation will be more urgent. Recently, when the economy was in recession, fewer people were working and fewer payroll taxes were collected for Medicare. So, the insolvency date moved from 2030 to 2028.

Like Social Security, a day of reckoning is approaching for Medicare. The Kaiser Family Foundation, a research organization, has identified a number of changes that might address the overall Medicare financing problem:

Restructuring Medicare benefits and the 80/20 percent cost share, requiring seniors to pay more than 20 percent.

Further increasing premiums for seniors with higher incomes.

Raising the Medicare eligibility age from 65 to a higher age.

Converting Medicare from its current “defined benefit” structure to a “premium support” structure similar to the recently proposed Obamacare revisions.

Accelerating the delivery system reforms in Obamacare, designed to control medical costs.

There will be changes! Stay tuned to the debates in Washington over Obamacare, Medicaid, Medicare, and Social Security!


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