It’s in the news again, the annual report by the trustees of
the Medicare and Social Security programs; and it’s even more depressing this
year than last. The trustees conclude
that the trust fund for hospital expenses will run out of money by 2026, three
years earlier than last year’s report projected.
Basic Medicare is divided into Part A, covering hospital
expenses, and Part B, covering physician bills, labs charges, etc. There’s also Part C which is Medicare Advantage
and Part D, prescription drug coverage. Part
B is funded mostly by the premiums charged to beneficiaries each month,
typically deducted from the Social Security check of those aged 65 and
older. The current monthly premium is
about $134 and is subject to adjustment each year. Part A, on the other hand, is funded by the
money withheld from workers’ wages at a rate of 1.45% and matched by 1.45% from
the employer. That formula leaves
funding uncertain because a recession or other factors can reduce payrolls and
thus the amount of money collected for the trust fund. And that is part of the reason for the poor
balance sheet.
But the other factor is the rocketing cost of health care
itself. Expensive therapies, pricey new
drugs, the reliance on specialists rather than primary care providers, plus the
growing demand for services as the nation ages all cause the trust fund to fall
farther behind each year.
I’m not alone in blaming Congress and a string of presidents
dating back to the 1960’s for not fixing this problem (none of them could
believably claim he didn’t know about it) and kicking this can down the road,
hoping we don’t notice (apparently a pretty safe bet) or that they have retired
from office before the day of reckoning.
This is very much a personal finance issue. When you retire and no longer have health
insurance through your employer (if you
ever did—many don’t), your options are Medicare (or some very fortunate few
with another plan through a union or longtime former employer like the federal
government) or a private policy that is either prohibitively expense or simply
not available. So what can you do?
This is not something you can solve alone. It will take national action to effect
change. I’m not encouraged at that
prospect when the treasury secretary optimistically observed this week that the
program is solvent “well into the next decade”.
Nice choice of words, but only a fool or a bureaucrat would say such a
thing. Would you be optimistic and confident if you knew you were going
bankrupt in eight years? But you can
definitely be a part of the change. I
would urge everyone to take these steps:
1. Take good care of your own
health by getting exercise, eating properly, getting enough sleep, and doing
the recommended preventive actions like regular checkups, immunizations,
etc. This will help reduce your need for
more expensive remedies and could lead to financial rewards if Medicare starts
offering financial incentives to use primary care over specialist care.
2. Don’t buy into the arguments
from special interest groups—even those to which you might belong—that the
government needs to spend more money on Medicare. I largely subscribe to President Ronald Reagan’s
explanation: More government isn’t the solution to the problem, it IS the
problem.
3. Be open to new and creative
ideas for reforming Medicare. More of
the same will not get the job done. Yet,
you’ve heard it before in political debates and I’m sure you’ll hear it again:
a candidate floats an idea for reforming Medicare and he gets blasted by the
AARP and the opposing candidate for wanting to “do away with Medicare as we
know it”. With Medicare going broke in
eight years, it’s probably not a bad idea to do away with Medicare as we know
it.
4. Write your senator and
Congressman to urge them to act to fix Medicare and to think creatively when
doing so. If Congress sees that
constituents care about an issue and won’t vote them out of office for doing
something bold (i.e. not just voting a tax increase or doing more of what’s
been done before), they might actually respond positively.
Wouldn’t that be a pleasant surprise?
Until next time,
Roger
“All hard work brings
a profit, but mere talk leads only to poverty.” Proverbs 14:23 NIV®*
*Scripture quotations taken from the Holy Bible, New
International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™Used by permission. All rights reserved worldwide
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