By Ross Schriftman, RHU, LUTCF, ACBC, MSAA
There has been much misinformation about what Congressman Paul Ryan’s plan does to try and save Medicare. According to the Medicare Trustees Report the program is in deep financial trouble and is not sustainable for the long term. Ryan has proposed that Americans under 55 today would receive premium support payments into private insurance plans approved by the government starting 10 years from now. When the first 54 year old reaches Medicare age, those payments would actually be 50% higher than the current cost of Medicare for each beneficiary. No current Medicare beneficiary and no one age 55 and older today would be affected.
I don’t know if his plan will work to save Medicare or not. However, it is clear that if nothing is done the program will be in worse shape down the road. I once heard a speaker use this simple formula for financial planning. Problem multiplied by time equals a bigger problem. Time is certainly against us. It was in 1993 that President Bill Clinton held an “Entitlement Conference” designed to address the financial problems of Medicare, Medicaid and Social Security. No action was taken after this conference. Now our Federal debt is over $14 trillion and the boomers are just starting to reach Medicare age this year. The Tsunami is now coming ashore.
So what is the alternative proposal to Ryan’s idea? I have heard nothing and read nothing from my Democratic leaders about what their proposal to save Medicare is. If we continue to follow the same path we have been following and we all go over a cliff. The result is higher Medicare premiums and higher deductibles and co pays with the imminent collapse of the program anyway. It is disingenuous to criticize Ryan’s plan by saying seniors will have more out of pocket in the future under his proposal. That is exactly what is occurring with the program now.
Look back 10 years and compare the out of pocket in the program to today. In 2001, the Medicare Part B premium was $50 per month. Today it is $115.40 per month or a 235% increase in government premiums and much greater than that for higher income beneficiaries starting at $80,000 of modified adjusted gross income. The Part B annual deductible was flat at $100 until a few years ago. Now it is $162. The hospital deductible under Part A of Medicare was $792 in 2001. Today it is $1,132 for each hospital stay/benefit period. The Skilled Nursing co pay for days 21 through 100 was $99 in 2001. Today it is $141.50.
Projecting the Medicare numbers out for 2021 using the last 10 years, seniors will face Part B premiums of $180 or much higher for many more people because there is no adjustment for the higher income surcharge. In 2021 the Part B deductible would be $180 and each time a beneficiary stays in the hospital they would have to pay $1,472. The skilled nursing co pay would be $184 for days 21 through 100. Is this not taking money away from seniors?
Ten years ago, buying a Medicare Supplement was a choice that people made. Today it is a necessity. The irony is that you need to buy a private insurance plan to cover all of the out of pocket costs of the government plan which you already paid for your whole working life in income taxes and payroll taxes. Still the government program is going broke. Then any politician who tries to address the problem is crucified as demonstrated by the recent disgusting TV advertisement by the Agenda Project showing Paul Ryan pushing a grandmother off a cliff.
So what has the current administration done? They got Obamacare passed which projects a $500 billion reduction in payments to health care providers within Medicare and diverts those funds to pay for expansion of Medicaid, government subsidies, regulations and enforcement under the so-called Affordable Care Act. The weight of all of this will continue to stagnate the economy reducing revenue for payroll taxes that go to Medicare Part A which has constituently run deficits the last several years. It is President Obama and his supporters in Congress that passed a law that drives a stake through the heart of Medicare at the very time the program is running out of gas.
We need to change course. Paul Ryan and Clinton Advisor and former Congressional Budget Office Director Alice Rivlin came up with one idea to address the Medicare solvency problem. The backlash against the proposal will diminish the chances of others coming forward with other solutions that may work to save Medicare. Look out baby boomers; the politicians are interested in their own future, their re-elections, privileges and sanctimonious rantings. They certainly don’t have our backs.