Medicare Funding Won’t Dry Up Any Time Soon!
There’s been one after another bad news coming in since the start of this year. If the pandemic threat wasn’t enough, it also led to a lot of people losing their jobs and thereby their insurance cover. And if you’re one of them too, or someone under the Medicare plan, you might start worrying about the government-funded healthcare program, Medicare, running out of funds.
Some people do wonder about the likelihood of such a thing occurring at some point or the other. However, diving into the sources of Medicare funding will console your concerns. You will realize that the future of Medicare’s future isn’t bleak or under threat of running out of funds. Let’s look at why the future of Medicare isn’t all that bleak!
First, What is Medicare?
The Medicare health insurance program is an American federal program designed for citizens aged 65 and older. The program also covers individuals younger than 65, but only with specific disabilities. The Medicare system is composed of three parts. Part A is hospital insurance, which includes the insured for inpatient hospital stays, care, and treatment in skilled nursing facilities. It also applies to hospice and certain home health care.
Part B of Medicare is medical insurance, offering coverage for specific doctor services, medical supplies, outpatient care, and preventative services. Then comes Part D, which provides coverage for prescription drugs. Part A does not have a premium, but Part B and Part D come with a premium.
Medicare Trust Funds
The Medicare health insurance program certainly costs the American government a lot. In 2018, Medicare costs clocked in at over $600 billion, covering over 56 million people. This amount is approximately 15% of the federal budget. Funds applicable to the health program are in two U.S government trust funds.
The U.S. treasury monitors these funds, which goes into paying for Medicare services. The funds are called the Hospital Insurance (HI) fund, and the Supplementary Medical Insurance (SMI) fund. Each fund has its revenue sources and covers different sections of the Medicare program.
The HI fund makes up 43% of the Medicare budget and obtains revenue from payroll taxes from the self-employed, employees and employers, and also from interest earned on the funds, the taxation of Social Security benefits. The HI und pays for part A related costs. The SMI fund covers Part B and D of the Medicare costs. It obtains its revenue largely from general tax revenues and the rest from the premiums, state payments and interest earned, and taxes on Social Security benefits.
Other Medicare Costs
Medicare costs are not only to cover the insured recipients because there are also administrative costs to see to. These costs add up to approximately $8 billion, as proposed by the Centers for Medicare and Medicaid Services. Then there is also costs allocated to protection form Medicare fraud, costing Medicare a sum of $52 billion in the year 2017, as an example of what this cost looks like.
Medicare and Financial Risk
There are news reports of Medicare’s potential insolvency by the year 2026. This is indeed a frightening projection, but in reality, the figures are a whole let dramatic. The worst scenario is less than 50% of the Medicare program becomes insolvent, at which point the Medicare program still has enough funding to continue with most of its operations.
Medicare trustees propose that should nothing change, and the HI fund will cover 100% of the Medicare costs until 2026 and then become insolvent. But incoming revenue will allow it to cover 91% of the costs right through to 2041, dropping its coverage to 85% by 2092. Meanwhile, the SMI fund faces no risks of insolvency since premiums and general funding are adjusted regularly to maintain the fund on solid financial ground.
So there you have it – there’s no need for anybody to worry about the Medicare health insurance program running out of the fund. Also worth knowing is that lawmakers hold Medicare financing and its future as a serious issue. And most of them agree that they will work on it before 2026. It thus ensures that there will be even lesser risks of having Medicare shortfalls by 2029. There’s nothing for us to worry about as the figures add up and assure you that everything is under control. And despite the pandemic and global economic crisis, the people of America will not lose their healthcare plan if they’re under the Medicare cover.
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