Medicare Reform

1. Medicare Reform Slides by Dr. Pedersen Mini-lecture by Mary Haven

2. Objectives • After reading the article of Social Security and participating in the mini-lecture online, the student will be able to: • Explain how the government trust funds differ from a pension fund. • State three possible ways of reforming Medicare through the patient. • State at least three ways of reforming Medicare through the financing strategy. • Suggest at least one method of reforming Medicare that you would recommend.

3. Government Trust Funds • E. g. Medicare and Social Security • Widespread confusion about structure, function, an organization of these trust funds. • Beginning with the creation of social security in 1935 (Roosevelt) • Revenues collected exceeded expenditures • Solution was the trust fund concept • Trust funds are a bookkeeping device!

4. Government Trust Funds • Government required by law to “invest” surplus funds in special treasury bonds • What happens in 2017 for social security when expenditures will exceed revenue? • Increase taxes? • Borrow more money? • Print more money? • Social security funds projected to be gone by 2042

5. Is Social Security a Pension Fund? • Senior citizens believe this! • A pension fund collects and invests money over time and earmarks it for the individual. • Social security collects taxes and pays out to current beneficiaries. • Social security is an intergenerational transfer system.

6. What about Hospital Insurance Trust Fund (Medicare Part A)? • In 1995, expenditures exceeded revenue • Surplus days were over! • In 1995, it was predicted that the trust fund would be exhausted in 2001. • However, revenue from 1996 to 2001 was much better than anticipated. • In 2004 expenditures exceeded revenue. • It is projected that the trust fund will be exhausted by 2019.

7. Medicare Reform Approaches • Patient • Means testing • Increase premiums • Increase age before eligible for benefits • Provider • Fee schedule reductions • Increase use of managed care

8. Means Testing hits Medicare in 2007 • Increased premiums based on means was passed in the Medicare Reform Act of 2003, the Medicare Prescription Drug Act. • The costs of monthly premiums for the Medicare Part B increase with the yearly income of the individual. • Next slide shows estimates of what the monthly premium will be.

9. Paying more for Medicare Part BMonthly Premiums by Yearly Income (Est.)

10. Medicare Reform (Cont.) • Financing • Defined contribution (Vouchers/Premium Support) • Adjust the Consumer Price Index (CPI) • Trust funds

11. What does all this mean? • Americans expect these programs to remain in place. • Medicare legislation has been proposed to • Slow rate of growth of provider payment • Increase use of managed care • Capitate aggregate FFS expenditure • Consider current and future U. S. economic conditions to develop your own forecast.

12. Medicare Reforms • Difficult choices • Centers on financing, not what is right. • What mechanisms do you think are likely to be applied?