Medicare Reform

1
Medicare Reform

• Slides by Dr. Pedersen
• Mini-lecture by Mary Haven

2
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.

3
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!

4
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

5
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.

6
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 2001.
• 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.

7
Medicare Reform Approaches

• Patient
• Means testing
• Increase premiums
• Increase age before eligible for benefits
• Provider
• Fee schedule reductions
• Increase use of managed care

8
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.

9
Paying more for Medicare Part BMonthly Premiums
by Yearly Income (Est.)
Year Less than 80K 80K to 100K 100K to 150K 150K to 200K More than 200K
2007 98.20 111.20 130.70 150.10 169.50
2009 98.30 137.70 196.70 255.60 314.60
2013 105.90 148.30 211.90 275.40 338.90
10
Medicare Reform (Cont.)

• Financing
• Defined contribution (Vouchers/Premium Support)
• Adjust the Consumer Price Index (CPI)
• Trust funds

11
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.

12
Medicare Reforms

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