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Medicare Enters its 58th Year in Poor Health

Medicare Enters its 58th Year in Poor Health

Sally Pipes By Wednesday, 02 August 2023 09:46 AM EDT Current | Bio | Archive

Medicare celebrated its 58th birthday on July 30.

Unfortunately, the healthcare entitlement for seniors and the disabled isn't aging gracefully.

If current trends continue, Medicare's Part A hospital insurance trust fund will run out of cash in just eight years.

By then, roughly one in five Americans will be 65 or older and — thus eligible for benefits. Avoiding a fiscal catastrophe will require some significant changes — and fast.

The most obvious involves raising the program's eligibility age, which has remained at 65 since its inception despite significant increases in life expectancy.

An American born in 1965, when Medicare was signed into law, was only expected to live to 70.

By 2019, life expectancy at birth had grown to 79.

It has since declined to 76, in large part because of COVID-19 and the opioid epidemic.

What's more, the number of Americans living to 100 has almost doubled during the last two decades, reaching nearly 90,000 in 2021.

In other words, today's Medicare recipients depend on the program for far longer than seniors in previous generations did.

A fact has putting enormous stress on the program's finances.

In light of these demographic shifts, increasing the eligibility age is only reasonable.

Means-testing the entitlement is another way to get Medicare's finances in order.

Prioritizing seniors who are actually in need — and letting wealthier individuals pay more for their coverage or simply purchase private insurance with their own money, perhaps on a tax-advantaged basis — makes much more sense, fiscally as well as morally.

But securing the program's long-term future will be impossible without more significant reforms to how Medicare is financed and administered.

In particular, transitioning to a system in which the government helps all seniors purchase insurance on the private market would solve many of Medicare's most urgent problems.

That help could be in the form of government-funded vouchers, which seniors could use to buy private coverage that fits their unique needs and preferences.

Under this arrangement, private insurers would have to vie for seniors' business by offering high-quality plans at the most affordable price.

By injecting some market competition into the program, voucherizing Medicare has the potential to both reduce overall spending and give seniors something far better than the one-size-fits-all coverage provided by traditional Medicare.

This dynamic is already at work in Medicare Advantage, the component of the program which allows seniors to purchase subsidized, privately administered health plans.

A sizable share of Medicare beneficiaries — 46% in 2022 — have already chosen Medicare Advantage plans over traditional Medicare.

And that figure is expected to exceed 50% in just two years.

This suggests that private insurers are more than capable of offering the kind of coverage that seniors want and need. Satisfaction rates for Medicare Advantage also tend to be on par with those for traditional Medicare.

Where Medicare Advantage really excels, however, is in controlling costs.

In 2023, the average Medicare Advantage plan bid to provide Part A hospital and Part B physician benefits at a cost 17% less than what traditional Medicare was expected to spend.

Private insurers could also be essential to reducing the amount and waste and fraud in Medicare. In 2022 alone, improper payments cost Medicare more than $80 billion.

The share of payments deemed improper was more than 15%.

Private insurers would have a much stronger incentive to minimize waste and fraud. After all, every dollar they improperly spend is one that does end up in their bank account. Improving the efficiency of the program could redound to insurers' — and taxpayers' —benefit.

Government-run health plans never age well -- as evidenced by the ongoing calamity at Britain's National Health Service, which turns 75 this year.

Medicare is a bit younger.

But it's in dangerously poor health, too.

Thankfully, its condition is far from terminal.

If policymakers implement a few common-sense reforms — and introduce more choice and competition into the program — Medicare's best years might still be ahead of it.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.

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The healthcare entitlement for seniors and disabled isn't aging gracefully. Securing the program's future will be impossible without more significant reforms to how Medicare is financed and administered.
private, market, reforms
Wednesday, 02 August 2023 09:46 AM
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