Medicare Matters to All of Us
With the arrival of fall, Medicare beneficiaries must consider which Medicare Supplemental Plan to sign up for. The air waves are blanketed with advertisements to get our attention and our mail boxes may also be filled with flyers and letters about choices to consider. Seminars are offered and one must make a decision to stay with one’s existing plan or select another. Prescription drugs are another issue and everyone must be familiar with Part D.
My objective here is not to discuss supplemental plans or the criteria one might use is selecting a plan appropriate to their needs. Rather, I want to focus on the financial status of Medicare and, in particular, I want to share some data from the 2018 Annual Report of the Trustees for the Trust Funds. Each year the Trustees must issue a report for the Congress and the 2018 Report has the most up to date annual data on the financial status of Medicare. The same Trustees must also issue an annual report on the financial and actuarial status of Social Security. These reports are typically issued in June and are the object of considerable reporting and analysis in the press and by advocacy organizations. Both Social Security and Medicare are extremely important to senior citizens and their families and, in reality, they matter a great deal to all of us whether are older or younger citizens.
My premise is that we need to know the financial status of Medicare so that we can act more ably as financial stewards for our tax dollars and be more informed as we represent our interests in the political arena. Supporting ideas that are contrary to our interests is hardly a wise course of action. So, let’s examine the financial data in the 2018 Annual Report for Medicare.
Medicare has two trust funds which are: Hospital Insurance (HI) or Part A which covers inpatient hospital care and Supplemental Medical Insurance(SMI) which covers physician costs, outpatient and related expenses and includes Parts B, C, and D. Part A is primarily financed by payroll taxes and employees and employers each pay 1.45 per cent on all earnings. Self employed pay the combined amount or 2.9 per cent. Total income for 2017 was $299.4 billion with $261.5 billion in payroll taxes, 24.2 billion in taxes on OASDI (old age survivor and disability benefits), 7.4 billion in interest earnings, 3.5 billion in beneficiary premiums and the remainder from General Fund and other sources. Program cost for the year was $296.5 billion or about 3.5 less than income. The HI Fund is projected to be solvent until 2026. This does not mean that the fund will be bankrupt. Instead, payroll taxes are projected to be sufficient to cover 91% of HI costs. Two points deserve to mentioned here. One is that the fund has had a surplus which in keeping with federal law was invested in treasury obligations that paid interest. The second point is that payroll taxes will still be able to cover most projected costs but it is in the interest of everyone to find a way to increase revenue or to exercise more control over health care costs or a combination of both policies.
The income for SMI for 2017 was $405.7 billion with $292.5 billion from General Fund reimbursements and $97.0 billion from beneficiary premiums. Thus, about 72% came from general revenue and 24 % from Part B premiums. Costs for Part B are increasing due to rising health care costs and an increase in the aging population. Given the importance of general revenue, everyone should recognize that any discussion of the federal budget may be an occasion to also focus on Medicare and to enact changes that can significantly alter the program. We also need to focus on monthly premiums including the fact that premiums are now linked to income.
Medicare and Social Security were designed as social insurance programs to cover all workers and all older people. The monthly premium for Medicare was not linked to income until Congress passed the Medicare Modernization Act. Linking premiums to income is a form of means testing which moves away from the concept of social insurance. Means testing is usually associated with the idea of welfare as opposed to an earned benefit and it may ultimately lead to a very different focus for Medicare. Both Parts B and D are now means tested. The standard Part B monthly premium for 2019 is projected to be $135.50 or $1.50 more than for 2018. Premiums for higher income beneficiaries are projected to range from $189.70 to $460.70.
The typical Part D monthly premium is expected to be $35.52 in 2019 and for higher income beneficiaries it may rise to as much as $82.90. Given the significance of health to the well being of older citizens and their families, it is important that we become more aware of the financing of health care and how to advocate for our interests as citizens. To see the Trustees Report for Social Security, please visit the website: www.ssa.gov
For Medicare, go to www.cms.gov and for an advocacy perspective, go to www.ncpssm.org for the National Committee to Preserve Social Security and Medicare.
Article by Henry M. Barlow, Ph. D., Colorado Coordinator of Volunteers for the National Committee to Preserve Social Security and Medicare