Medicare's hospital trust funds will be depleted by 2026. This is three years earlier than the last official prediction. The Social Security trust funds that support elderly retirees and disabled persons will be exhausted by 2034. Trustees of the funds issued these predictions on June 5 in their annual report to Congress.
Medicare Part A, the hospital trust fund, is financed largely by a 2.9 percent payroll tax. In addition to covering people over age 65, the program covers permanently disabled individuals under that age and people on chronic dialysis.
If we postpone addressing the looming bankruptcy, it will not be fixable. Medicare will either collapse or face sharp cuts in benefits and payments to providers. Either outcome would jeopardize the health of tens of millions of Americans.
In 2016, Medicare covered 55.5 million Americans, almost 17 percent of our population. Medicaid provides coverage for another 17 percent. Private insurance covers 34 percent. The $695 billion spent on Medicare in 2016 represents a fifth of total U.S. health-care expenditures.
Before President Lyndon Johnson signed Medicare legislation — Title XVII of the Social Security Act — an estimated 40 percent of Americans older than 65 years had no health insurance. A single accident or injury could force a family into bankruptcy. I recall an elderly farmer who was under my care during my second year of medical residency. He needed long-term dialysis if he were to stay alive. Treatment would cost him the small farm upon which his wife and children depended. His family had not reached a decision by the time of his discharge from hospital.
A steady increase in life expectancy has contributed to Medicare's deteriorating finances. Average life expectancy rose from 70.8 years in 1970 to an estimated 78.8 years in 2016. We are living longer but suffer increasingly from chronic illnesses such as diabetes, emphysema, heart disease, stroke, cancer and dementia.
Baby Boomers, the 76 million Americans born between 1946 and 1964, are retiring in increasing numbers, adding to the stress on Medicare funds.
Cost of acute and chronic medical treatment has risen sharply in recent decades. In 1960, the nation's health-care cost $27.2 billion, 5 percent of Gross Domestic Product. By 2016, this had increased to $3.3 trillion, almost 18 percent of GDP — a 120-fold increase. New drugs and technology can be extremely expensive.
We can fix Medicare by increasing funding of the hospital trust or reducing expenditures.
Funding options include an increase in the Medicare tax, a tax on medical devices and/or a tax on unhealthy products such as tobacco. Any tax increase would be difficult to steer through Congress.
Cost controls on any component of health care also would require Congressional action. Currently, drug and device manufacturers can set prices as they wish. Would Congress devise panels to review and to approve price hikes?
Substantial savings could be achieved by changing patterns of utilization. Earlier referrals of terminally ill patients to hospice programs would improve comfort and avoid lengthy, hospitalizations during final days of life.
Coordination of care for persons with chronic and multisystem disease can improve quality of life and dramatically reduce costs. A time-tested protocol is the Program of All-inclusive Care for the Elderly (PACE), which works within a budget to meet the comprehensive medical needs of elderly people on Medicare and Medicaid.
There are no simple solutions for ensuring Medicare's financial health. Ignoring this issue is not an option. The first step is to convince Congress that the problem is real and must be addressed. The second step is for voters, especially seniors, to become informed advocates for Medicare. Kaiser Family Foundation is an excellent resource (www.kff.org/medicare/issue-brief/an-overview-of-medicare/).
Medicare has served seniors and disabled people well. It must be sustained.
Clif Cleaveland, M.D., is a retired internist and former president of the American College of Physicians. Email him at firstname.lastname@example.org.