Why We Should Worry About Medicare

Having looked at the Social Security half of the Trustees’ new report yesterday, now, let’s go to Medicare. As the government program mostly targeting medical care for seniors aged 65 and older, Medicare has financial worries.

Medicare Worries

The Trustees

Like Social Security, the Secretaries of the Treasury, Labor, and Health and Human Services, are the three Cabinet members that, as trustees, make the program’s decisions. Then, in addition to the Commissioner of Social Security, there are two Public Trustees positions that have been vacant since 2015, and a Centers for Medicare & Medicaid Services Administrator /Secretary.

Funding

Funding for the 68 million people enrolled in Medicare primarily comes from payroll taxes and a Medicare income tax (part of which is from high earners). Funneled directly to HI, and spent on hospitalizations and post-hospital care, those payroll taxes finance Medicare’s Part A. Meanwhile the monthly premiums and general revenues that mostly cover Medicare’s Part B physicians’ services go to the SMI Trust Fund. Then, Part D helps to fund beneficiaries’ drug expenses while Part C is a partially private alternative to A and B.

Also like Social Security, 2033 is the year to remember. For Medicare though, HI depletion in 2033 is three years sooner than the 2024 report predicted. In just eight years, the program will be unable to cover 11% of its costs.

From 2024 to 2032 benefits and costs remain balanced. After that though, we have a benefits cost gap that will deplete HI:

Costs

Medicare’s costs represent a climbing proportion of our GDP. To reduce the spending gap, citing rising costs, the Trustees suggest more efficiency. They also point out that rising physician costs are not covered.

More specifically, they cite five reasons for increased spending:

Our Bottom Line: Demography

The elderly slice of our population is growing:

Consequently, with the top 5% of people aged 65 and older getting a 38% share of health spending in 2021, we have a sliver of the elderly population receiving a massive amount of health care spending:

Like me, you might wind up with a huge question. Seeing where demography is heading and remembering the tradeoffs, how much of our resources should we allocate to elderly medical care?

My sources and more: We began with the Medicare Trustees Report. Then KFF was the perfect complement as was Our World in Data.