Can Medicare survive the baby boomers?
Medicare remains one of the most popular federal programs. Any suggestion of changes is often met with public criticism and a lack of bipartisan support. But the next administration likely will have to muster the political will to make substantial reforms to keep the program robust for baby boomers and generations to follow.
Medicare's trustees expect that the program will spend $683 billion this year in its four benefit areas: Part A (hospital reimbursements), Part B (physician and other medical services), Part C (the Medicare Advantage private plan option that covers A and B benefits in an HMO-like setting), and Part D (drugs). By 2025 the total is expected to almost double to $1.286 billion. The Part A trust fund is forecasted to be insolvent by 2028, although dedicated tax revenues would meet 87% of obligations, and Congress has never failed to fully fund Medicare benefits.
While some of the rising costs can be attributed to increased longevity and a larger enrollee population, a much bigger problem is soaring incidence of chronic disease, including obesity, diabetes and Alzheimer’s. For example, 47% of elderly Medicare recipients in 2030 will be obese, compared to 28% in 2010. (Source: Health and Health Care of Medicare Beneficiaries in 2030).
Reform proposals made in the current and in previous presidential campaigns have included privatizing the system as well as changing benefit structure, eligibility, and payment models.
We asked our experts their thoughts on the sustainability of Medicare and what changes should be prioritized:
Etienne Gaudette, Ph.D. says sustainability of Medicare will depend on recognizing the changing health needs of the growing elderly population:
“The growing size of the elderly population in the coming decades likely will have the highest impact on expenditures and is well-studied, but is not the only source of risk for Medicare. Our simulations with the Future Elderly Model project important increases in the shares of the elderly population living with multiple chronic conditions and with disability in the coming years. This means that not only will there be a much larger older population, but this population will also have significantly more intensive health care needs.”
Julie Zissimopoulos, Ph.D. says considering the complexities of diseases like Alzheimer’s, investments in treatments will need to go hand-in-hand with payment reform:
“Individuals with Alzheimer’s disease (AD) experience impaired cognition and mobility increasing susceptibility to infections such as pneumonia that lead to costly hospital admissions, use of skilled nursing and long-term care. AD will cost Medicare and Medicaid close to $80,000 per person in 2050 and the number of older Americans with the disease will more than double during this time (Zissimopoulos, Crimmins, StClair, 2014). Even modest innovations in the treatment of AD, for example, a new drug that can delay the disease’s onset just 5-years will result in health care cost savings of $450 billion in 2050. But this is not enough. Medicare will continue to need payment reform and it must be extended beyond hospital services if Medicare is to contain costs over the long term. Payment for services, such as care in skilled nursing facilities (SNF's) and home health agencies (HHA's), will also need to be modified.”