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Medicare: Past, present and future

Medicare and what to do about it is one of the most bedevilling issues facing the nation — a problem that has both political parties and interest groups from the AARP to the AMA trying to find a way to shore up the increasingly unaffordable program.

Since Medicare and other social safety net programs were created in the mid-1960s’, the poverty rate for America’s elderly has dropped precipitously. However, the general U.S. population is aging and living longer, leading to inevitable increases in the program’s overall cost.

This week, Need to Know’s panel discussion examined some of the Medicare “alternatives” on the table: privatization, cuts to coverage and raising the enrollment age. The full menu is presented in a recent Kaiser Family Foundation’s brand new report “Policy Options to Sustain Medicare.”  

To truly understand how we got here, let’s first take a look back at the history of the program.

Medicare Past:

Video from The Kaiser Family Foundation

Medicare Present:

Today ,Medicare provides coverage for more than 50 million Americans, including adults over the age of 65 and younger individuals living with permanent disabilities. Medicare covers “health care services, including, but not limited to, hospitalizations, physician services, medical devices, and prescription drugs.” In 2013, average per capita Medicare spending is projected to exceed $12,000 (Boards of Trustees, 2012). While most people with Medicare use some amount of medical care in any given year, a majority of spending is concentrated among a relatively small share of beneficiaries with significant needs and medical expenses.

Medicare does not cover all the costs of health care, including long-term care for the elderly and disabled. Most people with Medicare have supplemental coverage to cover the out-of-pocket expenses the program does not cover.  Today, more than half of Medicare beneficiaries have an annual income of $22,500 or less. These Medicare recipients spend about 15 percent of their household budgets on health expenses; by comparison, younger households spend about 5 percent.

As the cost of Medicare rises — the growing expenditures impacts the American economy in it’s entirety:

Medicare costs -- percentage of total economy

Medicare Future:

With the past and present accounted for, here’s where Medicare is headed. According to the Congressional Budget Office, annual Medicare costs will reach over a trillion dollars by 2022.

annual Medicare costs 2012 and 2022

Glossary & resources:

For more information, the Kaiser Family Foundation has compiled some helpful resources on everything you need to know about Medicare. The 2012 candidates’ party platforms also give a simple glimpse into two dueling plans, see ProPublica’s analysis “Where the Candidates Stand on Medicare.”

But those campaign trail pronouncements barely scrape the surface. To get a clear sense of the plans on the table you need to turn to the new KFF report, Policy Options to Sustain Medicare for the Future. Here’s a basic categorization of what’s under discussion:

  • Raise the age of Medicare eligibility from 65 to 67 or raise it only for people with relatively high lifetime earnings
  • Increasing or modifying beneficiary cost sharing in a variety of way
  • Increasing beneficiary premiums
  • Increase revenue through: raising the Medicare payroll tax or other existing taxes
  • Reduce federal spending on the Medicare advantage program by lowering benchmarks, competitive bidding for payment rates, change risk adjustment and quality ratings
  • Reduce spending for prescription drugs
  • Reform Medicare’s physician payment system
  • Change malpractice systems through traditional or innovative tort reform
  • Accelerate implementation of payment reforms authorized under the Affordable Care Act
  • Improve care and reduce costs for high-need Medicare beneficiaries
  • Increase patient and family caregiver engagement:
  • Restructure Medicare’s traditional benefit design with a unified deductible, modified cost sharing, and a limit on out-of-pocket spending, possibly in conjunction with policies to discourage or restrict supplemental coverage
  • Provide a new government-administered plan with a comprehensive benefit package, as an alternative to traditional Medicare and Medicare Advantage

One of the reform plans getting the most attention (other than simply raising the eligibility age) is the one favored by former Republican VP candidate Paul Ryan. Called “Premium Support”  this plan aims to restructure the way Medicare is delivered — replacing current benefits with standard amount vouchers.

Typically, proposals of this nature provide a fixed Federal payment per enrollee and give beneficiaries the opportunity to choose among plans based on their own preferences for premiums, benefits, and other plan attributes. Proponents say this approach would promote greater competition among insurance plans and produce stronger incentives to reduce Medicare spending. Critics argue it would shift costs to Medicare beneficiaries and erode their entitlement to a defined set of guaranteed benefits. — Kaiser Family Foundation report

You can keep up on the ever-changing Medicare debate with Kaiser Health News, which has a robust viewpoints section.