Thursday, July 23, 2015

Absent Strong Action, Medicare Goes the Way of Greece

RCM ^ | 07/23/2015 | Joseph Antos 

Greece owes $320 billion to its creditors and cannot repay the loans. Like Greece, Medicare is also accumulating an unaffordable mountain of debt. And both Greece and Medicare are more likely to default on their debts than to adopt the highly unpopular reforms needed to pay them off.
Wednesday's news from the Medicare Trustees may not seem that dire.
The headline is comforting, but misleading. Medicare's Hospital Insurance (HI) trust fund-also known as Part A-will run short of money, but not until 2030. Starting that year, Part A benefits can be paid out only to the extent that money comes into the trust fund, mostly from payroll taxes. That's the same date predicted by the Trustees last year, so Medicare's financial situation does not seem to be worsening.
But the HI depletion date tells only part of the story. Medicare also pays for physician and outpatient services under Part B and prescription drugs under Part D. Because Part B and Part D automatically receive additional funding from general revenues, they remain solvent indefinitely. But that does not mean we don't have to worry about the rising costs of those benefits.
In fact, we are seeing a shift of Medicare services out of the hospital and into outpatient settings that are often more convenient for the patient and more cost-effective for the program. Part A services accounted for 50 percent of Medicare spending in 2008. By 2014, that share had fallen to 44 percent. That shift of spending makes Part A's financial outlook better because the money is being spent in other parts of the program that do not have insolvency dates.
We can see this more clearly by examining the funds flowing into and out of the program.
(Excerpt) Read more at realclearmarkets.com ...

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