Much discussion has taken place regarding the financial stability of Medicare and its ability to handle the current and future influx of members. Unfortunately, this conversation has been accompanied by a lot of misconceptions. Even though Medicare costs are continuing to increase and take up a large portion of the federal budget, it is an essential part of the American healthcare system, accounting for one-fifth of the total health spending in the U.S. Here are the four most common myths about Medicare’s financial future.
Contrary to popular belief, Medicare is not going bankrupt. While headlines may suggest that Medicare is running out of funds, this is not the case. Medicare Part A is funded by deductions from one’s wages during their working career, and if the amount of money stored in the trust fund is exceeded, Medicare’s spending increases. If Medicare’s spending continues at its current rate, it will still be able to pay for hospital insurance (Part A) for beneficiaries in full until 2026. Even after that, incoming taxes and other revenue will cover 89% of hospital insurance costs.
Rising Healthcare Costs
Rising healthcare costs are threatening Medicare’s ability to cover those who are receiving benefits from the program. Although Medicare spending has increased, it has grown at a slower pace than private insurance. For more than forty years, it has been predicted that Medicare would become bankrupt, but Presidents and Congress have taken steps to ensure that the program has enough funding so that it can continue to provide benefits.
The spending of Medicare is rising too quickly. Compared to the total federal budget, the spending of Medicare will grow slowly in the next 10 years. In 2020, Medicare’s share of the whole federal budget was about 12%, which is lower than it was in 2018. Under the current laws, this rate will increase to 20% in 2051. This increase in spending is mainly attributed to the retirement of the baby boomers (those born between 1944 and 1964), longer life expectancies, and healthcare costs that are increasing faster than the economy, as stated by the Peter G. Peterson Foundation.
Medicare Part D Costs
Medicare Part D coverage is not expected to disappear in the near future. The rapid increase in Part D costs has been attributed to the growing prices of specialty medications. Moreover, Medicare pays more for drugs that are prescribed to those with low incomes. Each year, the premiums for Part D are adjusted in order to cover some of the expenses of the prescription plans. It is difficult to predict what will happen to Medicare in the future, however, it is clear that it will remain in existence for the time being. Additionally, governments in the future can look for ways to reduce expenses, making sure that citizens have access to the medical care they need.