The Future of Aspects of Medicare - Essay Example

Medicare Part A is government-issued hospitalization insurance. Patients with Part A coverage have benefits that pay a portion of inpatient hospital stays, or long-term alternative care stays like skilled nursing facilities for lengthy recoveries or hospice for terminally ill patients. Part A "is funded by a 2.9 percent payroll tax which is directed to the Medicare Hospital Insurance Trust Fund account" (McClellan, 2000). Medicare Part B is supplemental. Eligible participants receive 80 percent of the allowed outpatient charges covered.

These services include office visits, lab work, x-rays, etc. According to the same McClellan study, "About three-fourths of the Supplemental Medical Insurance program is funded by general federal revenues and one-fourth by a beneficiary premium" (McClellan, 2000). He added that by 2009, Part B would see the most significant growth of all Medicare programs. Thanks to the Medicare Prescription Drug, Improvement, and Modernization Act MMA) of 2003, senior citizens became eligible for Medicare Part D, which pays a portion of prescription charges.

Quoting Gluck, 1999, McClellan writes, "Total spending on prescription drugs averages around $1,000 per beneficiary" (McClellan, 2000). . There is evidence that "long-term financial imbalances in the Medicare system make some sort of Medicare reform inevitable," (Cutler and Sheiner, 2000) but all is not lost. Cutler and Sheiner argue that people need only save a little more to balance the benefits that may be lost in the future. According to them, Medicare benefits could be cut by 40-60 percent, but private savings and the purchase of supplemental insurance would leave future beneficiaries in the same financial position that current beneficiaries are in.

Lee and Skinner, however, don't agree that those numbers can be crunched so easily. Their opinion is that with a declining mortality rate, and an uncertain number of births in the future, the population of persons aged 65 and older will have tripled by 2070. With that in mind, they see increasing the Medicare eligibility age from 65 to 67, and an "immediate 2 percentage point increase in the Social Security payroll tax" (Lee and Skinner) as a better way to avoid a "Medicare bust in the next century.

" About $200 billion was spent in 1996 for Medicare recipients (Newhouse, 1996). He estimated that a $122 billion Medicare surplus in 1996 would be a $444 billion deficit by 2006. Newhouse's ideas for decreasing Medicare spending were to get on the Clinton administration's bandwagon and require that Medicare recipients use Health Maintenance Organizations (HMOs) to remain competitive. Newhouse also suggested the use of Medical Savings Accounts (MSAs), which allow employees to set money aside from each paycheck, on a pre-tax basis, to help cover or reduce costs. Newhouse claims that implementing MSAs before retirement could save 25 percent if current spending trends hold. 

This is especially true, according to him, of workers who are later afflicted with long-term illnesses and injuries. For them, savings in the form of MSAs will already be in place. Although this plan was vetoed during the Clinton administration, Newhouse writes that this is the best plan for minimizing spending that can get out of control if an agreeable plan isn’t implemented soon.

 Most critics don’t dare say, conclusively, that the Medicare program is or isn’t going to face bankruptcy. The fact is, however, like anything else, it could run out of money if not properly managed. This management needs to be proactive so that a crisis can be averted before its happening. While several theories have been advanced within these pages, it is now up to the new 2008 administration to make a decision, and soon, about how to increase money in the Medicare funds, or how to decrease future spending, so that workers currently paying into the system, will still be able to reap benefits when the time comes.