Mediscare and Medicare’s Real Future

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Horsham, PA

Tel. 215-682-7075

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.

2 Responses

  1. The last paragraph hits the nail on the head. The Democrats are supporting the status quo with their failure (or refusal) to offer their own solution. Worse, by vilifying Ryan’s solution they slam the door on any real debate. As long as politician’s are more concerned about re-election than they are about governing, we are doomed to bad decisions that pander to certain interest groups, and non-decisions where action is needed due to cowardice in the face of potential pre-election reprisals. Too often our “representatives” think they are above us, but most are beneath contempt.

  2. Part of Congressman Ryan’s proposal has a long history of endorsement, even from stalwart Democrats, such as Henry Aaron of Brookings and Robtert Reischauer of the Urban Institute. They proposed a similar scheme in Health Affairs in 1995.

    But there is one crucial difference. They would have let the federal contribution to Medicare benericiaries grow at the growth of the average premium bid by the private plans, that is, in step with the annual increase in overall health spending. In Ryan’s plan with Alice Rivlin, the federal contribution would have grown at the growth of GDP per capita plus 1 percentage point. Dr. Rivlin parted ways with Congressman Ryan when he proposed to index the contribution only to the CPI, which grows much less rapidly than healht spending. The criticism is that it pushes too much of the total cost of care for the elderly onto their shoulders.

    That is the crucial difference, and why the Ryan plan has met with either skepticism or vehement opposition.

    Describing that plan with pictures of granny going over a cliff is unfair and hysterical, to be sure, but more understandable after Republicans talked darkly about death panels, Nazis, and “killing granny” (Senator Grasley) in 2009. Their behavior in 2009 puts Republicans in a tight spot now.

    One further irony: In 2009-10, Republicans vehemntly decried the $500 billion the Affordable Care Act cuts off the future growth of Medicare in this decade (out of a total of $7.3 trillion). It was called “rationing” or worse.

    Guess what? Congressman Ryan kept that very same cut in his budget. That, in my book, gives hypocrisy a bad name, as does talking abolut the deficit after passing the Medicare Modernization Act of 2003, which was 100% deficit financed and will add $1 trillion to the federal deficit in this decade alone. What goes around comes around.

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