Top 5 Things to Know About Medicare
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Two weeks ago we gave you a broad overview of the federal spending programs known as entitlements and last week we focused on the largest of those, Social Security. This week we look at the second largest, Medicare.
1. What Is Medicare,How Many Americans Are On It And How Much Does The Program Spend? Medicare provides health care to Americans over age 65 and has four parts, conveniently named A, B, C and D. Part A covers inpatient hospital care; Part B provides coverage for most doctors’ visits; Part C, known as the Medical Advantage program, is optional in lieu of the other parts of Medicare and offers “extra benefits such as hearing, vision, dental, or wellness programs” through private insurance plans; and Part D, another optional service, provides prescription drug coverage. In 2011, Medicare provided coverage for 48.7 million people and spent $549 billion.
2. How Is Medicare Funded? According to Medicare.Gov, the program “is paid for through two trust fund accounts held by the U.S. Treasury.” The first, the Hospital Trust Fund, is funded by payroll taxes that most U.S. employees and the self-employed pay. It is also funded from income taxes paid on Social Security benefits, interest earned on trust fund investments, and premiums from Part A beneficiaries. The second trust fund, the Supplementary Medical Insurance fund, is funded by through general government revenues, premiums from Medicare Part B and Part D and other sources like trust fund investment interest income.
3. Is Medicare Going Broke Like Social Security? Yes. According to the most recent Trustees’ report, Medicare’s hospital trust fund will run out in 2024. The Washington Postexplains, “At that point, incoming revenue from Medicare taxes will be enough to cover 87 percent of annual expenses. That share will decline to about 67 percent by mid-century …” Like Social Security, some of Medicare’s fiscal problems are due to demographics – fewer people paying into the system as more people drawing benefits and for longer periods of time. The rising cost of health care has also contributed to the erosion in Medicare’s bottom line. Health care analyst Avik Roy explains, “In 2010, the per capita cost of providing health-care services in America increased by 6.1% … Over the past decade, health-care inflation has risen 48% …”
4. How Well Is The Current System Serving Americans? Medicare guarantees a certain level of care for elderly Americans, but that hardly means it is quality care or improved access. According to Dr. Scott Atlas, Medicare is the “insurance program most likely to reject a claim.” Medicare rejects more than twice the number of claims private insurers do. Furthermore, Dr. Atlas points out, a 2008 study found 29 percent of Medicare beneficiaries who were looking for a primary care doctor reported having a problem finding one. A 2008 Texas study found only 58 percent of the state’s doctors accepted new Medicare patients. Physicians are increasingly reluctant to use the system and those pressures will only mount as Medicare’s finances worsen.
5. How Is Medicare Likely To Be Affected By Fiscal Cliff Negotiations? As we noted two weeks ago, Medicare spending will fall two percent as a result of the sequester spending cuts. As part of lame duck negotiations, lawmakers will also have to figure out whether to let a scheduled cut to doctors’ Medicare reimbursements go forward. (The uncertainty surrounding these payments is one reasons physicians are reticent to use the program.) Traditionally, Congress has prevented these cuts, as documented in this infographic.