Medicare is financed by a combination of taxes, subsidies and payments by people who use the system, and that’s where the problems lie.
How Social Security Changes Will Affect Medicare Part A
The 2009 Social Security and Medicare Trustees Report only covers Medicare Part A, which pays hospital expenses for people who use the system and is financed by direct taxes on workers and employers, plus deductibles and coinsurance payments made by beneficiaries.
[Note: Medicare Part D (the Medicare prescription drug plan) is changing too. To learn more, see Drug Companies Agree to Reduce Prescription Drug Costs by $80 Million in 10 Years.]
In 2008, Medicare Part A was financed by a 1.45 percent add-on to the Social Security tax. If there is no cost-of-living adjustment for Social Security recipients, about 75 percent of Medicare beneficiaries will not see any change in their basic premiums for Part B, which pays for doctor services and many other expenses Part A doesn’t cover. A monthly premium—$96.40 in 2009—is usually deducted from monthly Social Security checks.
For Some, Higher Medicare Premiums
A quarter of Medicare beneficiaries—those who are new to the system and those with higher incomes (more than $85,000 for individuals and $170,000 for couples) would face higher premiums: about $104 in 2010 and $120 in 2011.
Because 75 percent of Medicare beneficiaries’ payments will not increase, the remaining 25 percent have to pay more to keep the trust fund balance from dropping.
Medicare Enrollment Will Increase as Boomers Age
As baby boomers continue to age, keeping Medicare solvent and able to provide health care benefits will become more challenging and more urgent.
The number of Medicare beneficiaries is expected to increase 30 percent over the next decade, to 58.8 million from 45.2 million in 2008.
At the same time, Medicare spending per beneficiary will increase more than 50 percent, to $17,000 in 2018 from $11,000 in 2008.
