By Lawrence D. Weiss
For Senior Voice 

Great news! Medicare is not going bankrupt


September 1, 2018

Who in Alaska is glad to hear that Medicare is not going bankrupt? Certainly the 84,000 Medicare beneficiaries in Alaska are glad to hear that Medicare is not going bankrupt. And by the way, not all those beneficiaries are elders. Medicare beneficiaries in Alaska include about 13,000 people who are younger but disabled.

In 2014, the most recent year for which this information is available, total Medicare spending in Alaska was $741 million. That contributes to the incomes of thousands of healthcare providers and other health care workers in the state of Alaska. Certainly they are happy that Medicare is not about to tank.

Three-quarters of a billion dollars is no small potatoes, even in Alaska. That’s equal to about half the annual earnings of the entire lodging and food services industry in Alaska. Not only that, when there’s a dip in the Alaska economy, food services and lodgings are hurt along with other sectors of the economy, but Medicare stays solvent and continues to pay. That helps keep the entire Alaska economy a bit more stable.

The Center On Budget and Policy Priorities, one of my all-time favorite nonpartisan and nonprofit policy analysis organizations, studied the 2018 annual report of Medicare trustees. They found that,

“...Medicare’s Hospital Insurance trust fund [Medicare Part A] will remain solvent -- that is, able to pay 100 percent of all the cost of the hospital insurance coverage that Medicare provides through 2026. Even in 2026, when the Hospital Insurance Fund is projected to be depleted, incoming payroll taxes and other revenue will still be sufficient to pay 91 percent of Medicare Hospital Insurance costs.”

The National Committee to Preserve Social Security and Medicare, another non-profit organization full of good people doing the right thing, reports that,

“The 2018 Medicare trustees report shows that Medicare solvency remains greatly improved since the enactment of the Affordable Care Act [popularly known as “Obamacare”] because millions of Medicare beneficiaries are receiving preventive screenings and wellness visits without co-payments as well as additional assistance with their prescription drug costs.”

Here’s more good news: Medicare Part B, medical insurance and Medicare part D, (prescription drug coverage) cannot go bankrupt. These parts of Medicare are paid for out of the Supplementary Medical Insurance (SMI) Trust Fund, which is automatically financed by payments from federal general fund revenues and by monthly premiums paid by beneficiaries. Consequently, the SMI Trust Fund is adequately financed in both the short and long term, and is adjusted every year to stay that way.

Clearly the Medicare big picture is predominantly one of financial stability. However, there are multiple forces working to undermine that stability. The Medicare Rights Center is a national, nonprofit organization “that works to ensure access to affordable health care for older adults and people with disabilities.” Another do-gooder organization close to my heart. Center analysts note that,

“The trustees report identifies several factors that impact the balance of program funds:

projected lower payroll taxes because of lower wages for several years;

December’s Tax Cuts and Jobs Act, which lowers tax rates and therefore reduces the flow of revenue to the hospital trust fund; and

an aging population and general increases in healthcare costs, which put pressure on the program’s finances.”

In addition, the Medicare Rights Center notes that the current administration’s rollback of the individual mandate—which requires all Americans to purchase health coverage or pay a tax penalty— takes effect next year and is expected to lead to millions of additional people without health insurance.

“That in turn will leave hospitals with higher rates of uncompensated care. Some of those expenses are covered by a special Medicare fund paid to hospitals with larger numbers of uninsured patients. It will also lead to higher costs for the Medicare program as newly eligible people seek care for untreated conditions.”

In June of this year House Republicans produced a 2019 budget proposal that would balance the federal budget in nine years, primarily by cutting and fundamentally restructuring Medicare and Medicaid. The budget proposal would slash $537 billion from the Medicare program over 10 years. Moreover, Medicare’s guaranteed healthcare benefits would be replaced with a fixed-dollar voucher that beneficiaries would use to try to purchase adequate health insurance. At a minimum this approach would greatly increase uncertainty of access to health care for Medicare recipients.

The bottom line is this: a few relatively minor tweaks and adjustments every now and then will keep Medicare humming nicely into the future, providing health care for tens of millions of seniors and disabled persons. On the other hand, powerful political forces are busy undermining Medicare and trying to kill it. If that seems to you like a bad idea, there are national and local organizations that would welcome your membership, enthusiasm and energy.

Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.

Author Bio

Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.


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