Bad to Worse

Richard Quinn

IF YOU’RE IN a financial hole, is it prudent to keep digging?

There are 60 million Americans covered by Medicare, including 20 million who have opted for Medicare Advantage. These beneficiaries paid for their coverage through payroll taxes during their working years, and they currently pay with premiums and out-of-pocket cost sharing, as well as through taxes on Social Security benefits.

Still, this covers only a portion of total costs. In 2013, 38% of Medicare’s costs came from payroll taxes and 13% from Medicare premiums, but 41% came from general tax revenue. Our immediate problem: All of the above funding is inadequate to sustain current Medicare, let alone expand it. Medicare’s Trustees estimate the 75-year unfunded liability at $37 trillion.

But that’s not the full story. According to the 2019 Trustees Report, “The estimated depletion date for the [Hospital Insurance] trust fund is 2026… The fund has not met the Trustees’ formal test of short-range financial adequacy since 2003… the difference between Medicare’s total outlays and its dedicated financing sources is projected to exceed 45% of outlays within 7 years.”

As a group, seniors consume 36% of all U.S. health care spending. Yet Medicare benefits are deemed inadequate by many, because of deductibles and co-pays, coverage gaps and the absence of an out-of-pocket limit. As a result, most beneficiaries either purchase Medigap insurance or opt for Medicare Advantage, thereby filling some of those coverage gaps. Premiums for Medigap vary widely, but $200 a month is fairly typical. Medicare Advantage often also requires a monthly premium.

Keep in mind that this group is nearly 20% of all Americans and it’s growing rapidly—and yet now we’re debating whether to go beyond Medicare for seniors to offering universal health care to all Americans. The added cost would be significant—and I’m talking here only about seniors.

Those of us on Medicare would have all out-of-pocket costs eliminated, plus coverage may be expanded to include dental, vision, hearing and long-term “custodial” care—all areas not regularly covered by Medicare. It is estimated that 75% of seniors who need a hearing aid don’t have one. The typical cost is $4,500. Meanwhile, 70% who have trouble eating because of their teeth have not seen a dentist in a year, and 45% who have trouble seeing have avoided an eye exam. Is there pent-up demand? You bet.

What about long-term care? Covering nursing home costs is so risky and costly that many insurers have ceased selling long-term-care insurance. After initially being included in Obamacare proposals, it was dropped because it wasn’t feasible. Today, Medicaid covers 62% of nursing home residents—at an annual cost of $55 billion. What if it became 100%? What if the government started covering all kinds of long-term care, including care at home and in assisted living facilities?

So let’s think about this: We have the potential for 60 million Americans in an already underfunded program gaining substantial new benefits. Most already struggle to pay their health care costs, so it would be tough to get them to pay even more. Who will pay the added cost of universal care for me and my fellow senior citizens?

Hey millennial, can you loan me a dime?

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Missing the PointAn Old Man’s GripesMoney Pit and Crying Poverty. Follow Dick on Twitter @QuinnsComments.

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