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Medicare insecurity

Another trustees' report repeats familiar warnings. Will the feds have the stomach for to overhaul health care?

Published on Thursday, Mar 27, 2008

You don't need a crystal ball to predict the thrust of the reports the trustees of Social Security and Medicare put out every year: We have to shore up the finances of the entitlement programs for seniors or they will break under the strain of increased demand and declining revenues. The 2008 report released this week repeats the all-too-familiar warnings. Predictable, too, the report will generate a fair amount of verbiage and proposals on Capitol Hill, which may — or may not — result in the changes that will preserve the programs for the long haul.

Medicare is in the more precarious situation of the two programs. The trustees project that spending by the trust fund that pays for hospital benefits, Medicare Part A, will start running deficits by 2010 and the reserves for the fund, which serves about 42 million beneficiaries, will cover benefits until 2019.

The projections for Medicare Part B, which pays for outpatient services and doctor visits, are not as alarming. That's not to say they are comforting, either. Unlike the hospital fund, Part B is not expected to become insolvent. It is supported primarily by beneficiaries' premium payments and general revenue funds that can be adjusted to cover expenses.

As health-care costs and the use of medical services rise, so grows the pressure to raise premiums and increase the general revenue funds devoted to Medicare services. The first wave of 76 million baby boomers are a mere three years shy of qualifying for Medicare. The reasonable assumption is the use of health services will rise with the aging population.

Further, medical inflation has risen more rapidly than general inflation over many years. Despite efforts (such as malpractice reform and measures against fraud and waste) to slow the rate of inflationary growth in the health care system as a whole, it's unlikely the upward trend soon will be reversed. Part B premiums have risen 64 percent in the past five years, a fair indication that rising costs in the future will be reflected in higher premiums and a bigger percentage of government revenues to health care.

If the annual recitation of the financial challenges facing Medicare says anything at all, it emphasizes that without an overhaul that would restrain spending and high inflation throughout the entire health-care system, proposed changes limited to the federal program for seniors would amount to little more than swatting at the elephant.

For example, one measure to hold down costs is to steadily cut back reimbursements to doctors. The downside? Medicare beneficiaries may find fewer doctors willing to accept them as patients. Like the millions of uninsured who depend on crisis care, they will receive the care they need somehow, using more expensive services that add to the squeeze on health-care budgets.

You don't need a crystal ball to predict the thrust of the reports the trustees of Social Security and Medicare put out every year: We have to shore up the finances of the entitlement programs for seniors or they will break under the strain of increased demand and declining revenues. The 2008 report released this week repeats the all-too-familiar warnings. Predictable, too, the report will generate a fair amount of verbiage and proposals on Capitol Hill, which may — or may not — result in the changes that will preserve the programs for the long haul.

Get the full article here.


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