Medicare Financial Challenges

Though out of pocket fees already create a financial burden, demography changes will significantly increase the number of beneficiaries, and thus increase Medicare expenditures and costs. The number of individuals surviving into Medicare age eligibility has risen steadily, due to declining mortality rate, which will result in a 67% increase in Medicare beneficiary population by 2040 (Olshansky 149). In addition the number of Medicare beneficiaries will grow by 18 million people between 2012 and 2023, as the number of Baby Boomers turning 65 is projected to grow from 7,600 per day in 2011 to 11,000 per day in 2029 (Sahadi 1). As a result, annual net spending on Medicare will increase 80%, from $508 billion to $914 billion in 2023 (Sahadi 1).
The public is aware of the financial challenges faced by Medicare, including rising U.S healthcare costs, aging population, and declining worker to beneficiary ratios. As a result in 2014, six in ten individuals surveyed say Medicare is either in “financial crisis” or faces “major” financial problems (Mollyann et al. 136). Coupled with the sense that Medicare faces an uncertain financial future, there is a growing concern among Americans that the program will not be there when they retire. In 2014, another survey found six in ten workers were unsure whether Medicare would be able to provide benefits for them of equal value to the benefits received by retirees today (Mollyan et al. 136). In addition, nearly half of retiree voiced a concern that the quality of benefits they received would not continue (Mollyann et al. 136). The growing public concern about the future of Medicare only further demonstrates the need for reform to combat the rising
The current structure of Medicare is unnecessarily complex. While most employers offer employees a comprehensive coverage that includes hospital care, physician services, and prescription drugs, Medicare offers fragmented coverage with separate parts for each of the services. Low income, beneficiaries, unable to afford the high out of pockets expenses and ineligible for supplemental insurance such as Medicaid, are left without proper medical coverage. The growth in total program spending continues to increase, as the baby boom generation retires, putting increased pressure on Medicare finances and the federal budget. Medicare reform is required in order to effectively deliver medical care. Generally, all Part A beneficiaries also purchase Part B (Neuman 23). Thus, combining Part A and Part B decreases the structural complexity of Medicare and also introduces same deductibles for hospitals and physician services. In addition, establishing a Medicare out of pocket maximum reduces the risk of having to pay catastrophic amounts for large Medicare bills, reducing the need for Medigap and other supplemental services (Neuman 24). Finally, allowing the government to negotiate with drug companies would decrease the high costs of drugs for beneficiaries as well as for the government. These reforms would strengthen Medicare so that it can provide medical coverage to its intended