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  • Why Medicare Must Be Reformed

    Medicare is shaping up to be a deciding factor in the debate over our nation’s future.

    As Heritage’s Bob Moffit and Alyene Senger explain in a recent paper, “Why Traditional Medicare Must (and Will) Be Reformed,” the status quo in Medicare is unsustainable and unacceptable due to the program’s structural and financing flaws.

    Here are a few reasons Medicare needs to be reformed:

    • Medicare spending is growing faster than any other federal program. Medicare spending has reached unsustainable levels and is contributing to our budget deficits more quickly than any other program. Further, over the long term, Medicare has made $37 trillion worth of benefit promises to future seniors that are simply not funded. The hospital insurance trust fund is projected to be insolvent by 2024.
    • While seniors have paid for their benefits, their payments do not cover the costs of the program. In 2011, approximately 88 percent of Medicare’s spending was funded by taxpayers. A large part of the problem is the erroneous belief that seniors have fully paid for their benefits. In fact, Moffit and Senger explain that, “on average, a one-earner couple who retired at age 65 in 2011 and earned an average wage will have paid just $60,000 into the program but will receive an estimated $357,000 worth of benefits.”
    • Medicare enrollment is set to skyrocket. Baby boomers have already begun to retire. At the current rate of retirement, the program will enroll 10,000 beneficiaries into Medicare every day from 2011 to 2030. Moffit and Senger explain that “enrollment is expected to jump from 48 million beneficiaries in 2011 to 81 million by 2030.” This is coupled with a 50 percent decrease in the proportion of workers contributing to the hospital insurance trust fund over the same period. The outlook: more beneficiaries and fewer workers paying taxes to support them.
    • It’s a complex and outdated system. Medicare’s four separate parts are financed differently and operate under their own set of payment rules with different premiums, co-pays, and deductibles. Moffit and Senger write, “Medicare’s four-part complexity contributes to confusion among patients, inefficiency among providers, and higher costs for taxpayers. Care is chopped up and fragmented, reimbursed under an old and complicated fee-for-service payment system created in the 1960s that has long since disappeared from the private sector.”
    • An outdated and limited benefit structure doesn’t meet seniors’ diverse needs. Medicare has high cost-sharing requirements and does not protect seniors from catastrophic costs. For this reason, 90 percent of beneficiaries enrolled in traditional Medicare obtain supplemental insurance, most of which is private. Seniors are thus required to pay an additional premium for additional coverage (on top of their already rising Medicare Part B premiums). And because of the way supplemental coverage (such as Medigap) is organized, it encourages excessive utilization and thus raises the entire cost of the program even more for both seniors and taxpayers. In fact, this structural flaw adds 15 percent to 25 percent to Medicare program costs.

    Without reform, Medicare’s future is bleak. Washington’s current policy is to perpetuate the status quo and hope that an outdated combination of price controls—or the latest Medicare payment rate tweaks imposed under Obamacare—will control costs and deliver better benefits at a lower cost.

    Don’t bet on it. Only reforms that inject real competition into the program and empower seniors to control their own health care decisions can save the program for the next generation.

    Donald Schneider is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm.

    Posted in Featured [slideshow_deploy]

    5 Responses to Why Medicare Must Be Reformed

    1. Kygirl455 says:

      As a senior who was forced into the Medicare system when I turned 65, it annoys me beyond words to hear people speak of controlling costs and modifying benefits without ever mentioning Medicaid. People on Medicare did pay for those benefits during all their working years, and continue paying Medicare Part B premiums. Medicaid is a welfare program for which the recipients have paid nothing, continue paying nothing, are entirely financed by taxpayers, and have the Cadillac of health insurance plans. Don't talk to me about limiting Medicare, making me pay more for Medicare, or modifying my benefits until Medicaid costs are limited, co-pays and deductibles are instituted, and recipients are required to take drug tests and stop smoking.

    2. Fritz says:

      If the Dumbarats would have kept their IOUs out of it, Medicare would have all the money it needed. When the RATS saw all that money sitting there, they said that lets borrow some and we will pay it back. IF this was their own money they would have to pay it back. But since it is tax payers money, the Hell with them, we don’t have to pay it back. And that folks is why Medicare is broke. Congress has been rapping Medicare for the last 45 years.

      • Jeanne Stotler says:

        The money was not "Borrowed" it was stolen and put in General fund, same with Soc. sec.. We seniors who paid into our plans, by force, see our part "B" cost continue to go up as well as the cost for Supp. insurance policies. The Cola we recieve is usually eaten up with these increases, while the Gov't. keeps insisting the cost of food, gas etc has no impact on us. the average increse this Jan will be around $20.00, while food has gone uo over 50%. gasoline over 100%, doctors are refusing Medicare patients, all due to "Obamacare"

        • well, no. Obamacare is not the cause increasing food and gas price increases. And try as they might, people are finally starting to figure out that the romney message on "obamacare" is nothing more than the usual lies and distortions from Romney's disgraceful campaign. The primary reason that Medicare's costs are rising is because healthcare costs are rising. Obamacare is rresponsible for the substantial discounts seniors are getting in their Part D prescription drugs and free preventive care for things such as colonoscopies and mammograms (free meaning no co-pays). Keeping seniors healthier for a longer time is one of the reasons that Medicare's costs are increasing at a slower rate than previously projected. Note that this article didn't mention that…which is because Heritage has no interest in telling you the truth. Heritage only cares about getting the Mittwit and other Republicans elected because that's where their money comes from.
          Jeanne, don't buy the lie.

    3. muskegonlibertarian says:

      No one seems to be willing to speak the "truth". US health care costs are grossly excessive compared to what people who live in other developed countries than the USA pay for their health care. Simply access "Google" and find this out for yourself. Part of the problem is an uncontrollable system (created by lawyers) of malpractice law suits which is the driving force behind much of our excessive medical costs today. A solution to this would be a Constitutional Amendment that would forbid any member of the legal profession from holding any elective office. For a lawyer to serve in a legislative body is an automatic "conflict of interest" since the laws passed by such bodies are simply means for other lawyers to find ways to create more profitable lawsuits.

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