Find your high quality, low cost Medicare plan today!
See Plans Button

Preserving Medicare for Future Retirees

Happy Retired Couple | Preserving Medicare for Medicare for Future Retirees

Medicare has been providing future retirees with the security of health care coverage for over 50 years. In its existing form, however, it will continue to place immense pressure on the nation’s budget, with enormous future debt inevitable. Indeed, without addressing the deficit shortly, Medicare could collapse, and the safety blanket for millions of Americans would go away.

Demographics

You are entitled to Medicare enrollment if you are aged 65+ and have paid into the Railroad Retirement program or Social Security, or if you are disabled or on dialysis. Approximately 57 million Americans enrolled in Medicare in 2016. By 2030, there could be as many as 77 million people in the program, which will place tremendous strain on the system.

In addition, the ratio of worker to retiree will fall to 2.3:1. This compares poorly with the 3.4:1 ratio today and 4:1 in 1965. With fewer people working to fund the benefits of a larger program, the deficit can only increase under current conditions.

The average life expectancy of Americans has also increased, which means people spend longer on Medicare than ever before. In 1965, the average life expectancy was just over 70. It was 79.4 years in 2015; it will reach 80.7 years in 2030.

In 2016, Medicare’s total spending was around $683 billion. It is set to exceed $1.2 trillion in 2025.

The Pressing Issues

It is unquestionably difficult to reform such a sophisticated and wide-reaching program right now, but it will be virtually impossible by 2030 when the number of enrollees nudges towards 80 million and the annual costs incurred by the program are more than double what they are today. There are dozens of issues, but we’ll cover just two below.

Bureaucracy

Even proponents of Medicare acknowledge that the way it operates is inefficient with time-consuming and costly red tape a major problem. Medicare claims its administrative costs are below three percent, but this doesn’t include the costs of public provision. An example is a cost associated with federal officials forced to spend time and effort dealing with Medicare’s labyrinthine legislative and regulatory processes.

Physicians are obliged to spend countless hours complying with Medicare’s vast array of rules and completing the associated paperwork. As well as taking precious time away from their primary job, which is to speak with patients, it also places an emotional strain on doctors. Back in 2001, a PricewaterhouseCoopers study found that physicians spent one hour on paperwork and rule compliance for every two hours they spent with patients.

Fraud and Abuse

The sheer size and complexity of Medicare make it ripe for fraudsters. Despite the aforementioned bureaucracy, Medicare is seemingly unable to monitor payments efficiently. As a result, the program suffers from severe financial damage. A New York Times report in 2014 claimed that Medicare loses $60 billion a year to fraud and waste, almost 10 percent of its annual budget.

Federal law enforcement is working hard to handle the problem. The Department of Justice opened over 1,700 new criminal and civil health care fraud investigations in 2014 alone. Improper payment accounted for losses of over $43 billion in 2015.

Reforms

Medicare needs help to truly keep patients’ best interests at the forefront.

Reduce Complexity

For Medicare to survive, it should be simplified. An example would be the combination of Parts A and B with a uniform coinsurance and a single deductible.

Restore Patients’ Personal Freedom

Medicare patients should be able to engage in private agreements or contracts with any healthcare provider. These physicians must avoid financial penalties for helping patients. There is no good reason not to allow patients to have freedom of choice. In addition, the government needs to have greater control and supervision of doctors to ensure patients receive high-quality care.

Expand Eligibility

In places like the United Kingdom, the age of the state pension has increased to tackle the issue of greater longevity. Medicare should follow suit by increasing the age of eligibility, as 65 is simply too young to be sustainable. Experts believe that increasing the age to 68 over a 10-year period could save a substantial amount of money. Additionally, we can index the new eligibility age to the current life expectancy of the nation.

Base Premiums on Income

Congress should consider reducing the existing income thresholds. At present, a single person would need to earn over $85,000 a year to face higher Part B premiums while a couple would need a joint income of over $170,000 per year. Such individuals comprise just 6 percent of the population. A reduction to under $60,000 and $120,000 a year, respectively, should increase this to 10 percent of the population.

Accept Technology

Medicare must not resist technological advances, as they could improve the quality of care and save money. The Medicare Telehealth Parity Act of 2015 is something that needs to go into law, as it could completely revamp the current outdated approach to treatment.

The Telehealth process might involve sophisticated technology, but the process is simple. You can consult your physician via a medium such as Skype, and he can decide if you need further treatment. Experts say that Telehealth could reduce ER visits and hospital readmissions; the latter cost Medicare $41 billion in 2014.

Conclusion

Medicare has served America’s seniors well for the last half century. It has given them a measure of reassurance and offered continuous health care coverage for millions. However, the system is no longer capable of functioning in its current form. If significant changes do not occur, there is a danger that Medicare could collapse under the weight of its debt. As a result, future retirees would have to search for private insurers and would almost certainly pay far more for coverage.

There is plenty of reason to be optimistic, however. The new systems developed for Part C and Part D have shown encouraging results. The Part D program saved over $13 billion in its first year, for example. Reform could reduce bureaucracy and waste and relieve some of the pressure on overburdened doctors.

Pin It on Pinterest