If, like me, you saved that means to learn the 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance coverage and Federal Supplementary Medical Insurance coverage Belief Funds, in order that you would keep in control on problems with Medicare financing, Alicia H. Munnell has your again. She hits the excessive spots of the report in “Medicare Finances: A 2024 Update” (July 2024, Middle for Retirement Analysis at Boston Faculty, Quantity 24-16).
The Medicare program is 21% of all US well being care spending, and 14% of the full federal finances. It supplies medical insurance for just about everybody over age 65. To grasp the financing of this system, you want to know that it’s divided into 4 components. As Munnell explains:
Conventional Medicare consists of two packages. The primary – Half A, Hospital Insurance coverage (HI) – covers inpatient hospital companies, expert nursing services, dwelling healthcare, and hospice care. The second – Supplementary Medical Insurance coverage (SMI) – consists of two separate accounts: Half B, which covers doctor and outpatient hospital companies, and Half D, which was enacted in 2003 and covers prescribed drugs. The preparations are barely extra difficult as a result of Medicare additionally contains Half C – the Medicare Benefit plan choice, which makes funds to non-public insurance policy that present each Half A and Half B companies. … Spending on Half D prescription drug advantages has been a roughly fixed share of whole spending over time. Every Medicare program has its personal belief fund and its personal supply of revenues.
Half A is the Hospital Insurance coverage fund, which is usually funded by the two.9% payroll tax on wages, however which additionally will get some income from a further 0.9% tax on the wages of high-income employees and from a tax on higher-income Social Safety recipients.. Half B is Supplemental Medical Insurance coverage, which covers care by docs and outpatient hospital care, is financed principally by common tax revenues, but additionally with a contribution from insurance coverage premiums paid by the aged. Half C, the “Medicare Advantage” program which now covers about half of all Medicare recipients, is paid for out of the funds for components A and B. Half D “is financed primarily by general revenues (73 percent) and beneficiary premiums (14 percent), with an additional 12 percent coming from state payments for beneficiaries enrolled in both Medicare and Medicaid.”
The same old headline about Medicare funds focuses on estimates for the way lengthy the Half A Hospital Insurance coverage belief fund will stay solvent: within the 2024 report, the reply is 2036. However as this temporary overview suggests, the Half A belief fund is just one slice of this system. As Munnell factors out, the share of Medicare spending going to Half A has been declining:
Right here’s an summary of all of the sources of income for Medicare. As you may see, payroll taxes and insurance coverage premiums cowl solely a few of the value, with common tax revenues taking on a lot of the slack.
Because the determine additionally reveals, Medicare prices as a share of GDP have been rising considerably as a share of GDP. Additionally, with a mix of a rising over-65 inhabitants and well being care prices that preserve rising sooner than the final charge of inflation, Medicare spending is projected to be a rising share of GDP for the subsequent couple of a long time, as properly.
Certainly, Munnell factors out that 30 years down the street, protecting the well being care prices of the aged is more likely to value greater than offering the aged with earnings by way of Social Safety. Sure, medical insurance for the aged is good factor. However one suspects that among the many lower-income aged particularly, we’re reaching a stage the place a few of them would favor rather less medical insurance and a bit of extra cash in hand.
