A few facts need to be acknowledged at the onset of this paper:
- The Medicare payroll tax of 1.45% paid by workers and matched by employers currently brings in about $200 billion per year to the federal government.
- The current yearly cost of Medicare to the federal government is approximately $600 billion per year1.
- The Medicare Trust Fund is currently projected to be depleted by 2030 and can no longer be fully funded with dedicated revenues after that time2.
- Under current Medicare law, hospital inpatient benefits run out after a period of time. After a 90-day benefit period, an individual is entitled to a maximum of 60 lifetime reserve days. The individual then pays all costs for each day after the 60 lifetime reserve days are used up3.
- When the Medicare Part D “donut hole” is reached, individuals must pay most of the suggested retail price of prescription drugs.
Any solution to the above problems must 1) be simple enough to be easily understood, and 2) extend the projected solvency of the Medicare Trust Fund beyond 2030.
The following is my proposed solution to saving Medicare:
- Medicare parts A, B, and D would be merged into one program called Medicare part A.
- A $500 total annual deductible would be established for the new merged part A.
- After the $500 deductible has been met, Medicare recipients would pay 20% of any medical care or drug costs up to a maximum amount of $6000 per calendar year. (The constant pay rate throughout the year of 20% for prescription drugs would eliminate the “donut hole” problem that exists now.)
- Individuals would have the option of buying a supplemental insurance policy to cover up to 100% of the costs that Medicare does not cover.
- The Medicare payroll tax for each employee and his/her employer would be raised from 1.45% to 1.9%.
- The maximum number of lifetime reserve days for hospital inpatient care would be raised from 60 days to 120 days. (After that, Medicare could be billed for daily skilled care at a skilled nursing facility for the first 20 days after the hospital inpatient reserve days are exhausted.) (Medicare could also be billed by hospice for care provided to qualifying beneficiaries at their homes or in a nursing home for the remainder of their lives.)
- Medicare would aggressively identify and prosecute those providers who are guilty of Medicare fraud.
My solution would be financially better for some Medicare recipients and financially worse for some others. Medicare would pay 80%, and beneficiaries would pay 20% of Medicare approved amounts to providers. Medicare would send statements to beneficiaries of the amounts due to providers. Supplemental insurance could be purchased for the 20% required of beneficiaries.
Because my solution is much simpler than the current Medicare approach, Medicare administrative costs would be greatly reduced. Implementing the above measures 1 – 7 would result in aligning Medicare coverage more closely with insurance coverage available to working Americans. Medicare beneficiaries would continue to have the safety net of Medicaid to cover their medical costs if their financial condition would enable them to qualify.
My Medicare solution would be significantly simpler and fairer than the current Medicare approach. More importantly, it would save Medicare for current and future generations.
1 — “2013 Federal Budget”, Source: Congressional Budget Office, Arkansas Democrat Gazette, 08/13/14, pg 2A
2 — Social Security and Medicare Boards of Trustees, “A SUMMARY OF THE 2014 ANNUAL REPORTS”, http://www.saa.gov/OACT/TRSUM/index.html
3 — “Medicare & You 2014”, Centers for Medicare & Medicaid Services, pg 32