Medicare Reform Slides by Dr. Pedersen Mini-lecture by Mary Haven

Objectives After reading the article of Social Security and participating in the mini-lecture online, the student will be able to: –Explain how the government trust funds differ from a pension fund. –State three possible ways of reforming Medicare through the patient. –State at least three ways of reforming Medicare through the financing strategy. –Suggest at least one method of reforming Medicare that you would recommend.

Government Trust Funds E. g. Medicare and Social Security Widespread confusion about structure, function, an organization of these trust funds. Beginning with the creation of social security in 1935 (Roosevelt) –Revenues collected exceeded expenditures –Solution was the trust fund concept –Trust funds are a bookkeeping device!

Government Trust Funds Government required by law to “invest” surplus funds in special treasury bonds What happens in 2017 for social security when expenditures will exceed revenue? –Increase taxes? –Borrow more money? –Print more money? Social security funds projected to be gone by 2042

Is Social Security a Pension Fund? Senior citizens believe this! A pension fund collects and invests money over time and earmarks it for the individual. Social security collects taxes and pays out to current beneficiaries. Social security is an intergenerational transfer system.

What about Hospital Insurance Trust Fund (Medicare Part A)? In 1995, expenditures exceeded revenue –Surplus days were over! In 1995, it was predicted that the trust fund would be exhausted in However, revenue from 1996 to 2001 was much better than anticipated. In 2004 expenditures exceeded revenue. It is projected that the trust fund will be exhausted by 2019.

Medicare Reform Approaches Patient –Means testing –Increase premiums –Increase age before eligible for benefits Provider –Fee schedule reductions –Increase use of managed care

Means Testing hits Medicare in 2007 Increased premiums based on means was passed in the Medicare Reform Act of 2003, the Medicare Prescription Drug Act. The costs of monthly premiums for the Medicare Part B increase with the yearly income of the individual. Next slide shows estimates of what the monthly premium will be.

Paying more for Medicare Part B Monthly Premiums by Yearly Income (Est.) Year Less than $80K $80K to $100K $100K to $150K $150K to $200K More than $200K 2007$93.70$105.80$124.40$142.90$ $98.30$137.70$196.70$255.60$ $105.90$148.30$211.90$275.40$338.90

Medicare Reform (Cont.) Financing –Defined contribution (Vouchers/Premium Support) –Adjust the Consumer Price Index (CPI) –Trust funds

What does all this mean? Americans expect these programs to remain in place. Medicare legislation has been proposed to –Slow rate of growth of provider payment –Increase use of managed care –Capitate aggregate FFS expenditure Consider current and future U. S. economic conditions to develop your own forecast.

Medicare Reforms Difficult choices Centers on financing, not what is right. What mechanisms do you think are likely to be applied?