Medicare Healthy ... for Now

Turning 50 this month, Medicare has received a report card predicting reasonable long-term health for the program, but warning of future challenges posed by a surge of millions of baby boomers into the system in coming years. It also hinted at a possible return next year to a temporary shift in Medicare premiums, with some beneficiaries paying an additional amount for doctors’ services.

Medicare’s hospital trust fund, which collects workers’ contributions from payroll taxes to fund Part A coverage, will be able to fully support the program until 2030, according to the 2015 Medicare Trustees Report that was unveiled July 22. That projected date — when the fund is likely to turn the corner into insolvency — is unchanged from last year but 13 years later than the trustees projected in 2009.

“When the president signed health care reform into law, the trustees projected that it would extend the life of the Medicare Trust Fund by 12 years, from 2017 to 2029,” said Treasury Secretary Jacob J. Lew in unveiling the report. “Since then, the Affordable Care Act has helped reduce the rate of health care price increases to their lowest rate in 50 years.”

Although that is good news, the program still faces steep future challenges as 10,000 boomers turn 65 every day. Only five years from now, Medicare will have over 64 million enrollees, 10 million more than today. For now, those new beneficiaries are younger and healthier than others in the program, so they’re not placing much of a burden on it through claims. Nonetheless, like a snake swallowing a sheep, the system will eventually strain at the seams if no changes are made.

“AARP believes we can reduce costs and find significant savings in Medicare using responsible solutions rather than applying harmful cuts to beneficiaries in an attempt to save money,” commented AARP CEO Jo Ann Jenkins.

Although Medicare expenditures were lower for Part A hospital insurance and Part D prescription drug coverage in 2014, Part B costs rose slightly higher than were expected. As a result, the standard Part B monthly premium — always set at 25 percent of the previous year’s costs — is expected to increase, after staying flat for three years.

“While Part B premiums will be finalized later this year, approximately 70 percent of beneficiaries are expected not to see a premium increase in 2016 because it is projected that there will be no cost-of-living increases in Social Security benefits,” Medicare officials said in a press release. Their premiums would stay at $104.90 a month, because under the law people who receive Social Security benefits cannot pay higher premiums in years when there is no cost of living adjustment (COLA).

The other 30 percent — those who don't have their Part B premiums automatically deducted from Social Security checks — would pay $159.30 a month in 2016, the report predicted. This situation was last seen in 2010 and 2011, the last time no Social Security COLAs were given.