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Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.
Today’s column is our third and last excerpt from Phil’s new book, “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Expenses.” The book (and Phil) owe much to the many PBS readers whose questions have helped identify problems and confusion about Medicare and how it works. You can read the first excerpt from the book here and the second here.
There is a myth afoot in the land that consumers have completely paid for their Medicare, because they fork over 1.45 percent of their pre-tax wages in Medicare payroll taxes, an amount matched by their employers. The payroll taxes that go to Social Security actually do support all of that program, but in the case of Medicare, our payroll taxes come nowhere close to paying for program expenses.
READ MORE: Signing up for Medicare? Read this cautionary tale first
During 2014, the most recent full year covered by official government reports, nearly $600 billion flowed into Medicare and an even larger amount flowed out — $613 billion. Of this $600 billion, how much do you think came from payroll taxes? If you said less than half, you get to keep playing the Medicare money game. Medicare collected $227 billion in payroll taxes in 2014, or about 38 percent of its revenues. That leaves $373 billion unaccounted for. Premiums represent our dollars, too, so perhaps adding what we pay in Medicare premiums will justify the notion that we pay for Medicare. What do you think? Sixty percent? Fifty? Forty? Thirty? How about 21.5 percent, which translates into $80 billion in Medicare premiums.
It turns out that Medicare payroll taxes fully fund Part A hospital expenses (together with your share of uncovered Part A expenses), but that is literally where the buck stops. Expenses for Parts B, C (Medicare Advantage) and D (prescription drugs) are paid mostly by Uncle Sam, to the tune of nearly $250 billion. And this is, by the way, not a fixed line item in the federal budget but more of a blank check every year.
So while I not only support and respect seniors, and in fact have become a member of the seniors’ club myself, please do not attempt to blow smoke on me or anyone else by saying that you’ve paid for your Medicare. You haven’t, and I haven’t either. I happen to think my tax dollars are relatively well spent by Medicare and that supporting the health needs of older Americans is one of the best things this country and government do. But it doesn’t come close to paying for itself, and the gap will get larger and larger as baby boomers inevitably succumb to the realities of aging bodies and rising health care expenses. This doesn’t mean I support cutting Medicare benefits. Far from it. Today’s seniors deserve quality health care.
If you are a wealthier taxpayer, you get a double Medicare hit. You pay more in Medicare payroll taxes because you earn more (recall that, unlike Social Security, there is no wage ceiling on Medicare taxes). But you also pay more in Medicare Part B and Part D premiums, and this enforced tithing will get worse, beginning in 2018. In April 2015, Congress passed what was popularly known as the “doc fix” bill (its formal name is the Medicare Access and CHIP Reauthorization Act, or MACRA). It overturned a well-intentioned but ultimately unworkable effort to permit annual increases in Medicare’s physician payment rates only if overall economic growth exceeded the rate of health care inflation. The thinking was that the earlier measure’s use of what was called the “sustainable growth rate” would help restrain the upward pressure on doctors’ rates and combat health care inflation. Instead, during the measure’s nearly 20-year life, the economy seldom grew as rapidly as health care costs, and the law mandated annual cuts in doctors’ Medicare payments. Rather than go through with the reductions, Congress each year would fashion a “doc fix” — an eleventh-hour funding bill to void the cut. Getting rid of the fix did not come cheap — a projected $160 billion increase in federal deficits over 10 years plus higher Medicare premiums for some beneficiaries.
We still are in the early stages of peeling back the many layers of the onion labeled “Medicare health care provider” costs. For the past several years now, the Centers on Medicare & Medicaid Services have released a growing inventory of Medicare claims information detailing what doctors and hospitals charge for various health procedures around the country. We also know how much money drug companies have been paying to physicians. We can see the relationships between these payments and the prescription patterns of physicians who receive big pharma payments. In the worst situations, they seem like payoffs, but much more work needs to be done here. These newly released databases are enormous, and as interesting as they are, they also lack many details needed to create truly actionable cause-and-effect linkages. However, it’s just a matter of time before these linkages are established beyond a doubt.
As health care hurtles toward such game-changing capabilities, however, consumer empowerment lags far behind. To date, there is little evidence that we pay much attention. Studies show that when consumers do know the true costs of health care, they don’t engage in comparison shopping so much as simply cut back their use of health care.
READ MORE: Are you ready to navigate the overwhelming choices of Medicare?
For interested consumers, there are many health pricing tools. For starters, I recommend The Wall Street Journal’s “Medicare Unmasked” tools, although they may be behind a paywall. The Health Care Cost Institute is a health insurer funded effort to compare the cost of various procedures around the country. ProPublica, a nonprofit news site, is one of several consumer sites that has used the Centers on Medicare & Medicaid Services databases to build tools that are not exactly beloved by health care providers, including Dollars for Docs and Surgeon Scorecard.
Increasingly, Centers on Medicare & Medicaid Services itself will be providing more pricing transparency. And individual state efforts are also underway, such as the Consumer Reports partnership with California to produce California Healthcare Compare.
Phil Moeller is the author of “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs” and the co-author of the updated edition of The New York Times bestseller “How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security,” with Making Sen$e’s Paul Solman and Larry Kotlikoff. On Twitter @PhilMoeller or via e-mail: email@example.com.
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