Good afternoon, ProviderNation.
Today Medicare is now a nifty fifty. Besides being eligible for an AARP card, what does the future hold for this program? Our number-crunching allies at the American Academy of Actuaries, which also turned the big 5-O, today, released three of its Medicare@50 series of papers that are purported to be a CliffsNotes version for “actuarial analyses of public policy issues.”
“With 10,000 Americans now enrolling in Medicare every day, it’s more important than ever to take stock of the program,” said academy Senior Health Fellow Cori Uccello, adding that the series “identifies some of the most fundamental issues that policymakers and anyone concerned with the program’s future should be aware of, such as ‘How serious are Medicare’s financial challenges?’ and ‘What benefits does Medicare provide, and to whom?’ ”
In the first paper, “Is it Sustainable for 50 More Years?” Vicarious Risk Takers and the Academy of Calculating point 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.”
As such, the benefit payments are expected to exceed payroll taxes, threatening the solvency of one of its major trust funds: 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, according to the Medicare Trustees’ latest report. “Bringing the trust fund back into balance will require cuts in program spending, increased funding, or some combination of the two,” said the paper.
The second paper, “Who are the Beneficiaries?” Medicare is touted as “not a one-size-fits-all program.” There are many flavors of beneficiaries, not just those who turn 65, including younger individuals with permanent disabilities, individuals diagnosed with end-stage renal disease or amyotrophic lateral sclerosis, and those with low incomes who are also eligible for Medicaid (“dual eligibles”).
Medicare spending varies by subgroups. On average it is “higher for disabled beneficiaries than healthier beneficiaries aged 65 and older and for dual eligibles than for non-dual eligibles.” Here are more mind-boggling stats 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.
In sum, the paper says, “when evaluating whether and how the program is meeting the needs of the beneficiaries, it is important to consider not just the average beneficiary, but also the entire range of beneficiaries.”
The last paper poses the critical question, “Does it Meet the Needs of the Beneficiaries?” Since Medicare’s enactment in 1965, its traditional 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 overwhelming at best.
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 fatal 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 seen in private health insurance programs), which can leave beneficiaries “unprotected against catastrophic health costs.”
“Proposals have been suggested that would combine a new cost-sharing limit with a unified Part A and Part B deductible,” the paper says. “The copayment and coinsurance requirements also could be restructured.”
Essentially, a program that started off as socialistic may be turning more corporate as it ages.
Jackie Oberst is Provider’s managing editor. Email her at email@example.com. Follow her on Twitter, @ProviderMag.