And now, for the real Medicare report card
Annual Medicare Trustees' report buries the lede
Trustees for the Medicare and Social Security programs released their annual reports last week. The only numbers that many news accounts emphasized were how many years it will be before Social Security is unable to pay all of its claims, and when Medicare’s hospital trust fund will run out of money.
Thanks to the booming economic recovery, for which poor Joe Biden is getting no shout-outs from voters, the outlook for both programs improved.
Social Security reserves will be depleted in 2034 — one year later than projected in last year’s report — at which point payroll taxes will be able to pay only 77 percent of expected benefits.
Medicare’s hospital trust fund, which pays covered Part A expenses, will run out of money in six years. This is gloomy, indeed, but it is actually two years better than last year’s report.
This was the perceived news value of the reports.
Get What’s Yours, however, would like you to take a look at one table in the Medicare report that tells a more meaningful story than one-year-says-it-all punch lines.
Social Security and Part A are funded through payroll taxes. Patients also pay a small amount of Part A costs. There are no such trust accounts for the rest of Medicare, however. This includes:
Part B — Doctors, outpatient, and durable medical equipment.
Part C — Medicare’s name for private Medicare Advantage plans.
Part D — Private prescription drug plans.
These other parts of Medicare are funded by beneficiary premiums and general government revenues.
I know that Medicare beneficiaries feel they pay steep fees. However, these plans generate enough premium dollars to pay only small percentages of the medical expenses covered by Medicare. The rest comes from the federal budget and amounts to a blank check. If Medicare covers a health need, taxpayers will pay for it. No questions asked, or nearly none.
Whereas the health of the big trust funds is a big deal, the drain of unfunded Medicare spending gets nearly no ink. You can rectify this by sharing this post with 10,000 of your closest friends! There’s even a button!
The telling details about this spending are found in the Medicare Trustees’ report in Table II.B1, which covers 2021 Medicare spending. I love Substack but not the crappy way it displays tabular data. I’ve done my best but if these numbers look like mangled pasta, please download the table as it appears in the Trustees’ Medicare report.
I am not going to do a line-by-line walk-through.
First, look at the Part A column. Part A payroll taxes ($302.5 billion) generated more than 90 percent of Part A spending ($328.9 billion). Adding in other income produced a total for the year that exceeded spending. The Part A trust fund thus actually grew during the year, explaining the relatively good news about Part A in the Trustees’ report.
Moving on to the other columns produces a different story. Parts B and D of Medicare do not have dedicated trust funds. When spending exceeds income, which it does by a large margin — $318.6 billion for Part B; $85.3 billion for Part D — the program must call upon the general revenues of the U.S. Treasury. When you add up these subsidies, taxpayers wound up providing more than $405 billion to help pay the bills for these programs.
Looking at total Medicare benefits of $828.5 billion, Medicare Advantage plans (Part C) received nearly $350 billion of these funds, and private Part D plans another $104 billion, cumulatively totaling 55 percent of Medicare spending. This is the percentage that Medicare Advantage critics cite in claiming that the federal government is overseeing the privatization of Medicare.
This being the government, the 2012 Trustees’ report (yes, I am a pack rat) also contained a Table II.B1. That year, some key numbers for comparison were 50.7 million enrollees, $12,103 average benefits per enrollee, total benefits of $565.9 billion, and federal subsidies of $214.4 billion. Private Part C health plans received $136.2 billion and Part D plans another $66.5 billion, totaling 36 percent of overall Medicare benefits.
Private insurers are taking over Medicare. Their increasing role is more evident still if Medicaid private managed care plans are included.
This needn’t be a bad thing. Private businesses, love ‘em or hate ‘em, are a fundamental part of the American experiment.
The problem with Medicare, similar to the “greedflation” charges being leveled against U.S. companies exploiting energy and product shortages, is that private Medicare insurers are making enormous profits off of Medicare beneficiaries. These profits are nearly all legal, it should be emphasized.
But the optics are bad, and they’re made worse by a steady stream of studies and media investigations. Medicare Advantage insurers routinely and improperly deny care. Some also require beneficiaries to use proprietary networks of doctors and hospitals that may provide unsatisfactory care and involve self-dealing with providers owned by insurers. They can further game the system by “earning” large government capitation payments based on making patients appear sicker than they are.
I have been an early and often lonely supporter of managed care, which is what Medicare Advantage plans purport to offer. Fee-for-service Medicare is helping to bankrupt the country. If a user of original Medicare wants to get care covered by the program, they often can get the treatment without a physician’s referral, and Medicare will pay for it whether the person needs the care of not.
Private Medicare insurers have the health information systems and expertise to reduce unnecessary care and spending, and still deliver excellent health results for beneficiaries.
By and large, they’re failing to do so. I’d like to think this is part of an inevitable learning curve in moving toward value-based care. Increasingly, it looks like I’m guilty of wearing rose-colored glasses. Dark ones.
Philip Moeller is the principal author of the Get What’s Yours series of books about Social Security, Medicare, and health care. @PhilMoeller