The Future of Medicare Hanging in the Balance
Chiquita Brooks-LaSure, the first woman of color to hold the position as Administrator of The Center for Medicare and Medicaid Services (CMMS), announced her priorities to expand insurance coverage and health equity. A quick hairpin turn from the Trump Administration priorities of dismantling the Affordable Care Act, Brooks-LaSure takes notes of the lessons learned from the pandemic and how we can expand coverage as a country, while navigating finance issues. Stating that people want to be insured, but there’s a knowledge and accessibility gap the prevents uninsured Americans from finding solutions. Calling for an expansion of social programs such as the Affordable Care Act, Medicaid, and the new social safety net measures from Biden’s economic recovery efforts, Brooks-LaSure recognizes the need to fix the finance issue.
Many have heard rumors that Medicare will go broke by 2026. For some background, Medicare sources its funding from two trust funds. One is the Hospital Insurance Trust Fund, composed of funding from payroll taxes and covers Part A hospitalization costs. The Supplemental Medical Insurance trust is funded through premiums and government funding, and covers Medicare Part B (medical) and D (prescription drugs.) Current projections show the Hospital Insurance fund will no longer cover more than 90% of costs starting in 2026. Not nearly as drastic as public perception, but it will of course disproportionately impact the uninsured and low income people. The Supplemental Medical Insurance funding is more secure although does have some vulnerability due to the government as a main donor, in the event that increased insurance prices will force the government to pick up the bill and reduce its ability to contribute the same quantities to the trust.
It’s important to note the effect of the pandemic on Medicare because of the significant reduction in payroll taxes to fund the HI Trust, and subsequent increased healthcare costs due to hospitalizations among beneficiaries. The large majority of hospitalized people, among the most vulnerable age groups, were 65+ meaning that Medicare was paying part of their hospital costs. The combination of less workforce contribution from taxes and increased burden of cost on Medicare leaves Brooks-LaSure with a big question on her hands. Many predict the costs will need to be recovered by an increase in the corporate and personal income tax rate. However it’s also important to note that the reduction in cost coverage will and have fallen heavily on beneficiaries themselves. The pandemic did have positive impacts on Medicare coverage as almost 250 legislative changes to Medicare took place from January - July of 2020 (Investopedia,2021). Some of which include: Expands Medicare coverage for telehealth services (CARES Act), Eliminates Medicare cost-sharing for COVID vaccines (CARES Act), Increases some Medicare payment rates to providers (CARES Act), Waives some hospital length-of-stay requirements (CARES Act), Further increases Medicare payment rates to physicians (CAA), Eliminates Medicare’s sequestration cuts through March 2021 (CAA) (Investopedia, 2021). Many of these legislative acts had positive effects on beneficiaries, but expanded what CMS needs to cover, increasing the cost burden and reducing the fees received by primary care health systems such as hospitals and clinics.
A recent Kaiser Family Foundation study revealed, “As baby boomers age, 10,000 people a day pass their 65th birthday. The Census Bureau estimates that more than 94.6 million people will be 65 or older in 2060.” (KHN, 2021) More people than ever are going to enroll in Medicare and require long-term care. Because individual savings will not be able to cover costs as they stand today, this poses a big question to the Federal governments and CMS. The pandemic didn’t just affect Medicare, it also affected social security. Because less people were contributing to retirement through wages, and due to caregiving responsibilities and layoffs many people, especially women, were forced out of the workforce, social security also took a hit.
For brief background, social security is essentially “pay as you go retirement”; you contribute through wages and receive a share of your accrued benefits once you retire. That share is going to be significantly reduced in retirement due to rising healthcare costs and lower wage contribution. Luckily it’s predicted that the employment impact on social security will be recovered by 2023 (Investopedia, 2021) but the demographic impacts are just unfolding. Historically low birth rates means the workforce replacement rate will be lower than required, and we are going to face an issue with having enough formal and informal caregivers for the ballooning population aging into retirement. Some of this can be combated by higher wages; increasing individuals’ ability to contribute to social security and a larger share to fund Medicare and Medicaid, but if healthcare costs remain high, employers will have a difficult time finding the wiggle room to finance it all.
Brooks-LaSure recognizes these trends and sets them as a priority to discuss with Congress this year. Despite partisan divides, healthcare affects all people in all constituencies, meaning it will be a relevant issue for all politicians, especially in the face of midterm elections in 2022. Although it’s scary, we are at a point of reckoning for high healthcare costs, historical gaps in coverage and equity, increasing long term care costs, and a ballooning aging population. With strong leadership, evidence-based decisions and strong advocacy from Americans, we can push for a new future for healthcare in the United States.