Medicare Reform

1
Medicare Reform

• Slides by Dr. Pedersen
• Mini-lecture by Mary Haven

2
Objectives

• After reading the article of Social Security and
  participating in the mini-lecture online, the
  student will be able to
• Explain how the government trust funds differ
  from a pension fund.
• State three possible ways of reforming Medicare
  through the patient.
• State at least three ways of reforming Medicare
  through the financing strategy.
• Suggest at least one method of reforming Medicare
  that you would recommend.

3
Government Trust Funds

• E. g. Medicare and Social Security
• Widespread confusion about structure, function,
  an organization of these trust funds.
• Beginning with the creation of social security in
  1935 (Roosevelt)
• Revenues collected exceeded expenditures
• Solution was the trust fund concept
• Trust funds are a bookkeeping device!

4
Government Trust Funds

• Government required by law to invest surplus
  funds in special treasury bonds
• What happens in 2017 for social security when
  expenditures will exceed revenue?
• Increase taxes?
• Borrow more money?
• Print more money?
• Social security funds projected to be gone by 2042

5
Is Social Security a Pension Fund?

• Senior citizens believe this!
• A pension fund collects and invests money over
  time and earmarks it for the individual.
• Social security collects taxes and pays out to
  current beneficiaries.
• Social security is an intergenerational transfer
  system.

6
What about Hospital Insurance Trust Fund
(Medicare Part A)?

• In 1995, expenditures exceeded revenue
• Surplus days were over!
• In 1995, it was predicted that the trust fund
  would be exhausted in 2001.
• However, revenue from 1996 to 2001 was much
  better than anticipated.
• In 2004 expenditures exceeded revenue.
• It is projected that the trust fund will be
  exhausted by 2019.

7
Medicare Reform Approaches

• Patient
• Means testing
• Increase premiums
• Increase age before eligible for benefits
• Provider
• Fee schedule reductions
• Increase use of managed care

8
Medicare Reform (Cont.)

• Financing
• Defined contribution (Vouchers/Premium Support)
• Adjust the Consumer Price Index (CPI)
• Trust funds

9
What does all this mean?

• Americans expect these programs to remain in
  place.
• Medicare legislation has been proposed to
• Slow rate of growth of provider payment
• Increase use of managed care
• Capitate aggregate FFS expenditure
• Consider current and future U. S. economic
  conditions to develop your own forecast.

10
Medicare Reforms

• Difficult choices
• Centers on financing, not what is right.
• What mechanisms do you think are likely to be
  applied?