One of the obvious targets to try to control government spending is Medicare. The expected cost for 2011-2012 will be $483 billion.
How realistic is it to think that we could cut $400 billion (75%) of the budget of Medicare by getting rid of useless medical procedures and medications?
First some basics, for those who haven’t yet concerned themselves with what Medicare is (or isn’t). Medicare doesn’t pay for long term nursing care – that’s the patient’s responsibility, or State Medicaid if the person is poor (or some lawyer strips the assets away from the parent to give it to the children)
Medicare Part A pays in-patient hospital bills. Part A is paid entirely out of the trust fund. There is no premium paid by the patient. It will also pay for short term skilled nursing care following a hospital stay, and hospice care for those with a terminal illness, and home health care visits.
Medicare Part B pays for medical care done by the doctor – doctor fees, surgeon’s fees, tests, wheelchairs, physical therapy, oxygen, and services done in as an outpatient.
Medicare Part B is optional – paid for partly by a monthly premium. If you decide not to pay for Part B, you can only then get coverage during the annual enrollment period (Jan-Mar) and you will be charged a higher premium than if you had coverage all along. For 2011, the standard Part B premium is $115.40 a month (less if you have it deducted from your social security check) and more if you’re a “rich” person – up to a maximum of $369 a month.
Medicare Part D (thanks GW!) covers medications that you take yourself (Part B covers medications if they require a trained medical person to administer). What Part D costs is very complex – you pay a premium to an insurance company (typically $35 a month), and that covers you up to around the first $2800 per year (with a $310 deductible) – then you hit the “donut hole” – the next $2000 is entirely paid by the patient – unless they accept generic brands, in which case they only pay 50%… Beyond $4550/yr, you’re in the Catastrophic part D portion, that covers most of the drug costs for the expensive / exotic drugs.
Keep in mind that Medicare is also available to people on Social Security Disability younger than 65. Disability coverage begins 6 months after the point in time at which Social Security says your inability to work began. Note that for children (like with “autism”), the ability to perform work doesn’t apply – only that there is a diagnosis.
Medicare Part C is called Medicare Advantage – basically an HMO/PPO type plan that covers Parts A, B and D in a single plan. Medicare pays a part of the costs, and you pay whatever the monthly fee and deductible is that the plan you choose requires. Each January, you have the option to switch back to “original” Medicare A/B/D
Here is the Trustee’s spending report for 2011
https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf
Not surprisingly, the numbers don’t quite match up – keep in mind the Budget spending number is a “net” spending – part of the income paying for Medicare is the Part B Premiums.
The total expenditures of Medicare in 2010 was $522 billion. $116 billion of that was paid for the people who “Opted out” of Original Medicare and use a Part C plan administered by an insurance company.
Part A – Hospital coverage
Number of people covered: 47.1 million (7.9 million are disabled)
Hospital Bills: $136 billion
Skilled Nursing: $29 billion
Home Health Care: $7 billion
Medicare Advantage premiums: $61 billion
Administrative: $3.5 billion
— total expenses: $247.9 billion
Who pays for it?
Payroll Taxes: $182 billion
Trust Fund Interest: $13.8 billion
Taxes on benefits paid to the “rich”: $13 billion
Premiums: $3 Billion (todo: Who can “buy into” Part A coverage?)
Part B – Medical Services
Number of people covered: 43.8 million (7.1 on Disability)
Hospital bills (outpatient): $32 billion
Home Health Care: $12 billion
Doctors: $64.5 billion
Part C premiums: $55 billion
Other: $46 billion (testing procedures, 2nd opinions)
Administration: $3.2 billion
— total expenses: $212.9
Who pays for it?
General fund: $153 billion (Income tax / borrowing)
Patient Premiums: $52 billion
Since Part B is not funded by a dedicated tax, it is “pay as you go” – the general fund pays 3/4 of the cost, the patients pay the remaining part through their premium. People receiving Part B never “Paid into” Medicare. It’s 75% a gift paid from current taxes paid by the people not yet on Social Security.
Part D – Prescription Drugs
People covered: 34.5 million
Expenditures: $61 billion ($1,789 per person per year)
Who pays for it?
General Fund: $51 billion (thanks, GW!)
Premiums: $6.5 billion
Average annual benefit paid per enrollee (A+B+D): $11,762
(About 15% of which is paid by enrollees through their premiums)
Now, before we start whacking out 80% of these expenses, keep two things in mind. There are 47 million voters getting this benefit. Those 47 million people also have relatives who will either have to pay for their parent’s medical care, see the size of their “estate” shrink, take care of their own parents or watch their parents die. We are all socialists now.
If we cut out 80% of the benefits paid by Part B, then it is probable that people would no longer be willing to pay 25% of the cost of the program.
So put your cost cutting axe to this program, and let me know where you find the savings.
By the way, how much will the GDP of the economy go down when half of the people working today in health care are unemployed and they no longer pay taxes, can’t pay their mortgage…? and all the universities and medical training schools that no longer are in business since there is no demand for medically trained people….
I try to avoid contact with the medical profession at all costs…. but the few times I have recently (with private pay insurance), once the doctor is aware I’m a sentient creature, invariably they grumble at me that “The anesthesiologist is going to get paid more for this than me”, and especially how Medicare and Medicaid’s extremely low fee schedules force them to shift the costs to the patients not on government paid insurance coverage.
Actually, my ‘cut’ of $400 was from the entire HHS budget…
But let me provide a personal example of WHY it needs to be flushed out.
Just talked with a buddy of mine yesterday, he’s being treated for a form of low-grade stomach/intestinal cancer which is being covered by the Medicare system. He’s been to Mayo in Scottsdale, among other specialists in AZ, CO, KS, and LA (New Orleans).
He’s been receiving a monthly injections costing $3,000 (per month) which keeps the cancer ‘at bay’… he’s been on this for 18 months. Medicare paid for him to visit a specialist in New Orleans… he said it was a joke, except for one thing the doctor told him: “Switzerland has a cure for this, and it costs $50k, but FDA won’t allow us to use it here” and Medicare won’t cover the cost of patients going over there.
So, my friend’s “treatment” (which will continue) has thus far cost:
Mayo Clinic & others = $22,000
18 months x 3,000 = $54,000
New Orleans trip = $9,500
Okay, that adds up to $85,500 plus diagnostics, prescriptions and future treatment which will likely push his cost to Medicare over $150,000 by the end of 2012…. and that’s assuming he stays ‘well’ and doesn’t require any hospitalization or diagnostics.
In the mean time, they could have spent $50,000 to cure the problem.
Just one example of the bureaucratic waste and fleecing through HHS/FDA.
By the way, how much will the GDP of the economy go down when half of the people working today in health care are unemployed ….
I think Obama already has that covered… something is going to ‘give’ somewhere!
Does anyone remember what the medical profession in the U.S. was like before the Federal government decided to improve upon it? Medicare etc. started under Johnson in 1964 with his “war on poverty” platform, right? What happened to folks who got sick before the government was there to subsidize treatment? I was too young to remember details, but I don’t recall any of my older relatives being bankrupted by medical bills the way so many people are today. I also don’t recall medicines being so expensive that you needed drug insurance coverage. People would have thought the idea ludicrous. My family lived in suburbia in Tennessee in the mid 60’s and I can remember our family doctor making house calls for earaches and high fevers. That kind of doctor-patient relationship disappeared quickly after 1965.
LBJ’s “war on poverty” was supposed to eliminate poverty by 1970 (and thus all the new programs would be temporary and end as soon as poverty was “eliminated” — I guess the same predicament awaits the war on terror?).
Of course, when you subsidize something, you get more of it, therefore we have ever growing “needs” to pay for illegitimate children, free health care, subsidized housing, food stamps, etc etc.
Trillions of tax dollars later we have a higher poverty rate, higher divorce rate, higher illegitimacy rate, a runaway deficit, and and, last but not least, millions of Americans in the “entitlement” class that did not exist before LBJ. These same people will riot in the streets if their benefits are taken away. Great job LBJ and every administration and congress since!
We are in the small minority that seem to understand the medical “crisis” was created by Medicare and Medicaid. When a third party is the payer, the doctor views the “customer” to be the insurance rather than the patient. The doctors then started playing the game of “You’ll only pay me $40 for this, and I want $50, so I’ll send a bill for $200 to the patients paying their own bills – so you’ll raise the “ordinary and customary” to $60″.
Even Newt Gingrich can’t envision the possibilty that without health insurance, the patient might actually pay their own bill.
Another thing the government changed – it used to be you could deduct all medical expenses from your taxes (if you itemized). Somewhere in the 1970s, they put in an exclusion (3%? of Adjusted Gross) so that you got no benefit unless you had a catastrophic expense (and if you’re that sick, pretty good chance you don’t have a big AGI)
And the self employed could not write off their own health insurance premiums (that has changed in the past few years)