u08a1 Project Development

Timothy Anthony

BS Psychology

POL-1000 The Politics of American Government

Winter 2011

HYPERLINK “mailto:tanthony1@capellauniversity.edu”tanthony1@capellauniversity.edu

Professor Neil Kraus

Impeding Medicare Problems

Introduction

Medicare is a health insurance program for people with 65 year of age and above, people under 65 years with certain disabilities and people of all ages but with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant). It constitutes three parts, namely; pert A (hospital insurance), part B (medical insurance) and “prescription for drug coverage”. Medicare has two sources of funding as Academy of Actuaries, (1996 p. 6) explains. The first and the major source is the allocation from the federal budget while the rest of funding is derived from deductions from social security funds and its premiums. Recently, Medicare has not been receiving sufficient funding from the above sources. Consequently, this program has encountered financial and other operational problems that have left its budget in huge deficit. There seem to be minimal actions to taken by responsible organs mitigate the impacts of these problems, leaving the future of this program at stake. This paper addresses some of these problems and the impact they have to the beneficiaries of Medicare program. In addition, it provides and suggests solutions that could be put in place to arrest the situation affecting Medicare program.

Medicare problems

Owing to the impeding problems, the Medicare program is not going to be sustainable in the near future unless significant measures are taken. To start with, the current funding of beneficiaries by this program does not take into consideration the diversity existing within the senior citizens population. As McKenzie, J. F et al (2008, p 445) explains, it allocates Medicare benefits equally to the senior citizens who are 65 years and above. As such, this plan fails to consider that there are differences in health care needs for the senior citizens aged 80 from those who are 65 year of age. To be more specific, there is likelihood for a person aged 80 years to experience health problems more than a younger person aged 65. As a result, this plan is unfair not to the recipients alone but even to the doctors who offer these medical services.

According to McKenzie, J. F et al (2008, p 445), as the number of senior citizens who are retiring increases, the health care costs have been rising rapidly. Similarly, Medicare liabilities have been escalating with time. At the same time the funding of the health care benefits from the employers is decreasing with even some abandoning it. It is possible that people are going to lose as it becomes more and more expensive. According to the 1995 trustee report, (as cited in American Academy of Actuaries, 1996 p. 6), “in the 35 years (from 1995), the Medicare program income will be sufficient to pay only 47% of the program’s cost and only 35 % of its costs over the last 25 years of that period if the current trend persists.”

It is possible to sustain the Medicare program services intact through the support of the federal budget. But as McKenzie, J. F et al (2008, p 445) explains, the federal budget is already experiencing crises with the existing liabilities of this program and there is no likelihood of such choice in the near future. As the rate of healthcare spending increase, policy makers and third party payers will be forced to evaluate new cost-control solutions. As American Academy of Actuaries, (1996 p. 13)explains, legislators are already considering to effect cost cutting measures in future such as reduction of the number of people receiving benefits, reduction of the costs to the government and reduction of costs per beneficiary. Of course, this will have a great negative impact on the traditional delivery of health care.

According to Mechanic, D., (2006 p 19), the supplementary Medicare insurance program does not have a separate payroll tax. Rather, it is financed through contributions from general revenues of the federal budget and direct premiums from the participants of this program. Thus, the funding of this program is determined every year. This translates into inadequacies in financing this program. In the next 10 years, the expenditure for this program is expected to triple. This will have a big impact on the federal budget

Solution

Media coverage can help to bring awareness and tress more about the problems facing this program to people. Through the media can we can be able to solve these problems by clearly bringing out the causes of the existing problems in this program to the American society. Of course, Medicare program benefits and is expected to benefit a great number of American citizens. Therefore, increased sensitization of this matter to the people is likely to easily elicit reaction from a bigger section of the society. This will help to push the government to play its relegated role in setting up policies that focuses on supporting Medicare program. Viable strategies by the government to strengthen this program will give assurance health safety future for all Americans now and in future, (Mechanic, D., 2006, p 19)

Suggestions

One of the options to address the problems facing Medicare is to increase age of eligibility, (American Academy of Actuaries, 1996 p. 6). Currently, the retirement age of Americans is 65. The normal retirement age for social security funds is scheduled to increase to age of 67. The main purpose of establishment of Medicare program was to provide benefits to individuals after retirement. It will thus be advisable to raise the age of eligibility for Medicare benefits to be consistent with the normal age of retirement. Though a significant number of those who retire early may not be covered by health insurance, this will help to eliminate a significant amount of already existing deficit. However, if the age of retirement and also age of eligibility for Medicare benefits increase to say 70 years, this would help to eliminate much of the existing Medicare deficit if not all.

The second option to deal with the problems facing Medicare benefits is to eliminate some coverage services. Currently, Medicare is limited to deal with services that are necessary for the treatment of illnesses or injury, (American Academy of Actuaries, 1996 p. 6). But, some of the services involved could be considered unnecessary for the treatment of injuries or diseases. hospital insurance for health care agencies and nursing homes as well as the supplementary medical insurance payments meant for durable medical equipments can be terminated and help to solve at least two-fifths of the existing Medicare deficit.

Another suggestion is to increase share of costs for the beneficiaries. This means that the beneficiaries’ can be increased as much as to help eliminate the existing deficit. As American Academy of Actuaries, (1996 p. 6) explains, this can be achieved through increment of coinsurance and deductibles. If the increased sharing of costs is not covered by insurance, it means that there will be likelihood of reduced utilization. However, the savings form the utilization would be relatively small and affect supplementary medical insurance more. Financial problem facing Medicare may be mitigated by increasing recoveries from other insurance. Currently, Medicare is seen as a minor player to other forms of health insurance veteran administration benefits, workers’ compensation and employer-sponsored insurance. Stricter focus of Medicare as a secondary player by the present law compared to the others may help to reduce Medicare costs, (American Academy of Actuaries, 1996 p. 6)

Another suggestion is to growth of overall payments or to reduce the rates of repayment to the providers. Efforts by policy the government to constrain reimbursements have proved inadequate for restoring Medicare solvency, (American Academy of Actuaries, 1996, p. 6). To achieve this objective, major reductions in the growth of Medicare payments would be required that could disrupt the providers severely. For example, a 1% growth in hospital reimbursement for each of the next 10 years will help to maintain solvency over 10 years. Such a change will be more effective if it is consistent the overall health reimbursement policy and also the practices of other players.

Conclusion

Medicare is and will remain being a popular program among the citizens. But the problems facing this program will be there both in the short and in the long-run if not addressed adequately and quickly. As the senior citizens retiring increases, costs associated with Medicare will continue to rise. Eventually, this will have a dire effect to the recipients and to the government. This explains why this program requires immediate action to its income and outlays into balance. The public can help a lot in achievement of this end. Of course, this will require increased sensitization about what is happening to this program. The media can help a lot to reach to the public and stress this information to them. Still, to deal with financial problem affecting Medicare, there are various different options that can be employed. It is therefore the duty of the government to evaluate the many available options, put them into practice and save this program.

References

Mechanic, D., (2006), the need for change and the forces against it, The truth about health care:

why reform is not working in America, Rutgers University Press, Piscataway

American Academy of Actuaries, (1996), Solutions to Medicare financial problems, public

policy monograph, American Academy of Actuaries publications, Washington DC Retrieved from http://www.actuary.org/pdf/socialsecurity/socsec_m.pdf

McKenzie, J. F., Pinger, R. R. & Kotecki, J., E., (2008), problems with Medicare and Medicaid,

An introduction to community health, Jones & Bartlett Learning, London