Harry S. Truman is the only modern president to not be a millionaire in his life. He struggled with his finances, and caused the presidential salary increase in 1949. At the age of 81 years old Harry Truman witnessed Lyndon B. Johnson sign Medicare into existence. With the stroke of his pen, Harry Truman and millions of Americans gained a medical safety net never before seen.
Medicare has changed in the 55 years since its inception. It started as health Insurance for people 65 and older. Now it has grown into a massive socialist program. Medicare expansion in the 70s included those with disabilities and end stage renal disease. Today, medicare covers over 15% of the population of the United States.
For most working Americans, paying taxes qualifies them for Medicare. Anyone with a paycheck knows the pain of paying Medicare and Social Security Tax. The pain has a purpose though. Over 75% of Americans that are eligible for Medicare use their benefits each year.
Medicare is funded and regulated by the federal government, but still relies on private carriers to fill coverage gaps. In the case of Medicare Advantage plans, private insurers create the entire policy.
Gap filling plans are called Medigap, or Medicare Supplement Policies. These private supplements pay everything that Medicare does not. In some cases, they even cover Medicare Co-Pays, and foreign travel.
Advantage plans are generally PPO’s or HMO’s designed by Private insurers and approved by medicare. These network plans replace traditional medicare coverage completely. They can also provide extra benefits that medicare would not provide. Also known as Medicare Part C, Advantage plans were formalized by The Balanced Budget Act of 1997.
The biggest disadvantage of Medicare Advantage are the high copays. 30% of traditional medicare expenses go to inpatient hospital stays for beneficiaries. To avoid this high cost, advantage plans have Inpatient Hospital Copays up to $1500. While medicare can and does help millions of americans, it can still be inadequate for many.
Medicaid is an extra social safety net for those with poor incomes or limited resources. Created alongside Medicare, Medicaid runs at the state level. There are federal level regulations, but each state ultimately runs their own Medicaid program.
Medicaid has seen significant expansion under the Affordable Care Act. While some states have rejected these expansions, studies have found that opting out can cost more than it saves. emergency services for the uninsured end up costing more than the price of expanding. Studies like these are interpreted in wildly different ways. One side of the aisle sees this as the only option for low income families, the other side worries about the ever increasing healthcare prices. Some even blame medicare for the price of healthcare in the United States.
The future of Medicare and Medicaid is uncertain. Plenty of folks left of the aisle would like to see an expansion of Medicare that covers every citizen. Others feel government involvement has hurt consumers, and needs to be eliminated.
With a healthcare system subsidized by the government, costs for Americans have increased from $1,900 per capita in 1970 to over $11,000 in 2019. In that time, Medicare and its surrounding programs have gone from a welcome protection, to the only choice people have. The second highest healthcare costs on earth are in Switzerland at only $7,000 per capita.
Covid hasn’t helped either. A single symptomatic COVID-19 patient can have healthcare costs of over $3,000. As of January 15, the number of symptomatic cases in the US has surpassed 70 million. These costs put a burden on the medicare and medicaid system. They have also caused private Medigap and advantage plans to reduce coverage and raise rates to compensate their losses. Price hikes and service cuts directly affect Americans who rely on Medicare.
Where is all this Medicare money coming from? Most people don’t know that medicare is paid out of two separate trusts held by the U.S Treasury Department. These trusts are funded by allocations from congress, as well as their own earnings on investments.
According to the Congressional Budget Office (CBO), these funds may be looking at the end of their solvency. In other words, they are running out of money. The CBO estimates that these trusts could be empty as soon as 2024 without significant restructuring.
This article has no agenda beyond an educational discussion. As it stands now, there are two ways things could go if they do change.
A completely private healthcare system could produce healthy competition in a free market. This would allow competitive insurance companies to provide individualized plans to citizens.
The price of medical care could decrease as healthcare providers begin to compete for business. It could also place a significant burden on the most vulnerable members of society.
On the other hand, Medicare could be completely expanded to a single payer system. This would eliminate the need for private insurers filling “gaps.” It would eliminate the entire health insurance industry as we know it. It would even eliminate a litany of bureaucratic costs at every level. But the government is notorious for their inefficiencies. With a single payer system, competition goes away, and healthcare prices could reach even higher highs.
There is no magic pill to fix the American healthcare system. Many Americans rely on the system as it stands now. Others feel that the Medicare system has done nothing but prevent them from getting the care they need.
Harry Truman once said, “I usually find that those who are loudest in protesting against medical help by the federal government are those who do not need help.” This is very true, and while it sounds like a liberal rally cry, it’s much more nuanced than it seems. Those that don’t need help can see the costs more clearly than those who are in the thick of things. The man who is dying of thirst will be willing to pay more for water than the man who is not, but the price of water will go up all the same.
For now, the only winners are the insurance companies. Until we can decide which way to go, prices will continue to skyrocket, and Medicare will continue to get gouged by healthcare providers.
If you have any specific questions about your medicare, health insurance or any other financial issues, be sure to call a Strong Family Agent to find the best path for you.