Friday Links

Posted on by John C. Goodman

California: People are leaving and the state’s income is falling.

Web searches for “racial disparities in healthcare in the United States” produce nearly 40 million hits.

Medicare 2023 Trustees Report: The hospital insurance (HI) trust fund is scheduled to become insolvent in 2031 when Medicare patients will face an 11 percent cut in their hospital benefits.

Biden administration moves to partially decriminalize marijuana. I don’t think anyone is in jail for using or possessing marijuana. These prisoners have plea bargained to avoid sentencing for more serious crimes.

Aaron Carroll: RFK Jr. is wrong. Vaccines are tested against  placebos.

6 thoughts on “Friday Links”

  1. Thanks for posting the excellent Moffitt article on Medicare financing.

    I noted the statement by the Trustees that a payroll tax increase from 2.9% to 3.52% would resolve this — but Congress would not approve this increase.

    Does anyone in Congress realize what peanuts this is? For a worker making $70,000 the increase would be about $200 plus $200 from the employer — for the whole year.

    For a program with tremendous value for the country, this is absolute peanuts. The anti-tax orthodoxy in Congress can go too far.

    Rich nations like Germany approved a 16% payroll tax for national health insurance without blinking. And we are going to refuse an 0.62% increase?

    Reply

  2. I have trouble believing that an increase in payroll tax to 3.52% could provide a permanent solution to the Part A shortfall, even though that’s what Moffitt’s article seems to suggest. And what about Parts B and D? Payroll tax is only projected to cover 29.9% of Medicare expenditures in 2030; does increasing this to 36.3% really solve the problem?

    I don’t see how anything works without addressing growth. One proposal is to raise the eligibility age as was done with Social Security. But then the question is whether 65- and 66-year-olds cost more to insure than they pay in premiums and IRMAA taxes. A one- or two-year increase may not net much.

    Reply

  3. Bart, you sure are right about the limitations of the payroll tax. Medicare Parts B and D have no trust fund, and no dedicated taxes. They get tossed into general revenue along with Defense, welfare, federal employee wages, the federal share of Medicaid, et al…..and the whole ungainly package is deep in deficit.

    Medicare part B was passed in 1965 to be half covered by senior citizen premiums. We are a long way from that now. Part D was passed in 2003 with no special funding whatsoever. We were just a few years removed from Clinton’s budget surplus, and no one seemed to care about deficits.

    Reply

  4. Thanks Bob. But please disregard the last two sentences in my previous comment. Obviously a $165 monthly Part B premium is far below any actuarial cost for a 65-year-old.

    Reply

    1. Bart, the full cost of “original Medicare” – Parts A and B – is $1,166 per person per month, or just under $14,000 per person per year. For a couple, the yearly cost is nearly $28,000 per year.

      By statute, the total Part B premiums paid by seniors are set at approximately 25% of the projected full Part B cost for the year.

      Thus the projected cost of Part B per person, per month can be estimated as 4 x 165 or $660. A few years ago that formula was tweaked to adjust the Part B premiums based on income. It’s my understanding that the overall 25% proportion still holds.

      Part A is provided without a premium if the person enrolled has 40 quarters employment in which they paid Medicare taxes. About 99% of Part A enrolled persons do. Medicare also sets Part A premiums for persons with fewer than 40 quarters. That premium for 2023 is $506 per person per month and represents the full per person, per month Part A cost.

      Adding together the Part A and Part B monthly cost gives $1,166 per person per month, or $13,992 annually. Almost all seniors pay only their Part B premium which is about 14% of the total Medicare cost. Taxpayers subsidize the rest.

      Medicare coverage ain’t all that great either. One indication is that its benefits are not sufficient to qualify a private plan with equal coverage to be offered in an Obamacare Exchange. Example: Seniors must pay $1,600 per hospital admission and, for confinement of 60 days or more, must pay $400 per day. Another example: Seniors pay 20% of Part B expenses – without limit. And keep in mind, Medicare does not reimburse expenses incurred outside the United States (an important thing for seniors who travel to know).

      The combination of cost vs benefits helps explain why it is essential for seniors to purchase a Medicare Supplemental policy – at their own expense – to be adequately covered. It also helps explain why nearly half of Medicare-eligible seniors have joined a Medicare Advantage plan – as Bob Hertz and I have done. .

      Details here:

      https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly

  5. Thanks John. “Tweaked” is an understatement. I guess those of us who face IRMAA charges should be happy knowing the $560 maximum for Part B is less than the estimated $660 actual cost. But it least in my case it should only last a few years, until my Roth conversion pipeline clears.

    When I initially signed up I chose traditional Plan G, mainly because it seemed to leave more options open for future switching. It’s something I’ll have to revisit. But MA wouldn’t help with IRMAA charges.

    Reply

Join the conversation.