Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.
Trustees of the Medicare and Social Security programs released their annual reports last week, detailing their operations during 2014 and their outlook for the future. As is the case with these reports nearly every year, they occasioned mass amnesia. Politicians, lobbying groups, and the news media all appeared to forget that 2013’s report (and the ones before that) essentially said the same thing.
And yet, breathless news accounts were written as if these two reports had last been issued in 1914. Conservative and progressive interest groups responded with their traditional dances in front of their respective microphones to lament either the profligacy of these programs or the stone-cold values of those who would even think of trimming benefits.
Politicians, of course, travel with their microphones in a mutually dependent embrace. They stepped up as well, particularly Jeb Bush, who spoke of the need for reforming Medicare and was immediately eviscerated by a large school of liberal piranha. That’ll teach him to attempt a nuanced discussion. Yet, is there really anyone, liberal or conservative, who doesn’t think Medicare is in need of change?
GOT MEDICARE QUESTIONS?
In Factland, by contrast, there was modest news in the reports, even allowing for the lax standards of a summer day in Washington. The Medicare trust fund, which everyone thinks is very important but really isn’t that important, is projected to cease being able to pay out all its benefit obligations by the year 2030. This is the same year as was projected in last year’s report.
The reason the Medicare trust fund is not that important is that it covers only hospital expenses incurred under Part A of Medicare. Meanwhile, Parts B (doctors and outpatient expenses) and D (prescription drugs) have more or less a blank check from Uncle Sam to cover most of their expenses every year. Even Part C (Medicare Advantage) gets a federal subsidy.
Descending a wee bit into the statistical weeds here, it turns out that the Part A shortfall was only a bit more than $15 billion last year. This was the gap between Part A spending and what consumers forked over in Part A payroll taxes and other taxes on Part A benefits. In Parts B and D, by contrast, consumer insurance premiums totaled only $77 billion versus benefits spending of nearly $340 billion. Nearly all of the difference was funded by general Treasury revenues. That’s why the headlines about the Part A trust fund are misguided.
Social Security has two trust funds — one for retirement and one for disability benefits, respectively. The disability fund is in crisis and is projected to run out of money in 2016. In last year’s report, the disability fund was projected to run out of money in — you guessed it — 2016.
There was a smidgen of good news in the Social Security report. The retirement trust fund now is projected to run out of money in 2035 — one year later than in last year’s report. The long-run deficit in the program was also trimmed a bit, but nearly no news accounts dwelled much on that.
Perhaps the biggest news is that Part B premiums will run amuck next year for a sizable minority of beneficiaries. Part B premiums are designed to cover only about a quarter of program expenses (the rest comes from the blank check I mentioned earlier). Normally, everyone’s part B premiums would increase to come up with that 25-percent share. If that was the case next year, the report said, everyone’s premium would rise, from this year’s base level of $104.90 a month to $120.70. This is a big hike and is driven by higher-than-expected increases in the government’s Part B expenses.
But in the Rube Goldberg world that passes for Medicare and Social Security governance, there is a “hold harmless” rule that says the government can’t raise Part B premiums on existing beneficiaries if their Social Security benefits don’t also increase. Because there has been so little inflation in the past year, it looks like there will be no cost of living adjustment (COLA) next year for Social Security benefits. So, ipso whatever, these folks can’t be pegged with higher Part B premiums.
This will load the entire burden of required beneficiary Part B payment onto roughly 30 percent of beneficiaries, a group that includes wealthier folks and those who will be new to Medicare next year. So, 70 percent of beneficiaries will still pay $104.90 a month (or more if they have higher incomes). But the Part B premiums of the other 30 percent could soar by more than 50 percent, the report said — from a base level of $104.90 a month this year to as much as $159.30 next year. Welcome to Medicare, you newbies!
While the trustee reports fade from the headlines and public consciousness, I want to share with you a note I got last week from Marie in Alaska. She should have been up on the podium last week with Medicare and Social Security trustees. It’s her report — not theirs — that we should keep in mind as we continue to fail in any meaningful way to put these critical senior support programs on sustainable trajectories.
Seniors face many issues on Medicare. There are too many doctors who won’t accept Medicare patients or new Medicare patients. There is a lack of wellness care. Medicare will only cover consultation with a nutritionist if one already has diabetes or kidney failure. Regular consultations with a nutritionist could prevent many cases of diabetes and kidney failure. Medicare covers a chiropractor to crack a back, but not a massage therapist. Many people would receive greater health benefit from a massage than a back cracking. That vision, dental, and hearing care is not covered just leads to people becoming less healthy, less independent, and less able to contribute to society.
I hope to see these kinds of issues addressed. I am 67 and am trying to be fiscally responsible and physically healthy. I pay for Medicare Part B, a supplemental plan [Medigap], and Part D out of Social Security income of $700 a month. I have no TV and do not travel. I hardly ever see a doctor. I had to pay $2,000 for a root canal, and I neglect my eyes, which are important to me. I asked to see a nutritionist but was told Medicare would not cover it. I am proud to be able to pay for my own food and do the best I can, but the Medicare program needs to be improved to attend to more than medical emergencies and the dying.
I wrote back to Marie and suggested any number of programs that Medicare provides to help pay for drugs and other care that is covered by Medicare. Her response:
I have some savings so my assets don’t qualify me for extra help. I could spend them down in a flash. But what person who values their independence and wants to retain some dignity would want to spend down their savings? All we really want is some good preventive care to stay healthy and the opportunity to manage our own lives with a low income and limited assets as best as possible.
I will ask Marie each and every year from now on for her annual report on the status of Medicare and Social Security. If we can make life better for the Maries of the world, then we just might be on the right track.