En español | Today, nearly 50 million Americans rely on Medicare for their basic health coverage.
Workers pay into Medicare throughout their working lives so Americans age 65 and over, as well as people with disabilities, are guaranteed health coverage. Worker contributions, government funds and payments (such as for premiums, co-pays and deductibles) from people enrolled in Medicare fund the program and the health benefits people count on when they grow older.
Medicare’s health coverage comes in parts, and generally:
- Helps pay for hospital bills.
- Helps pay doctor bills.
- Helps pay the cost of needed medications for those who choose to buy the optional prescription coverage.
- Provides a choice between a traditional fee-for-service plan (which allows a person to see the doctor of their choice) and a Medicare Advantage plan, which is a private insurance option similar to an HMO (Health Maintenance Organization) or PPO (Preferred Provider Organization).
- Medicare doesn’t provide coverage for all health needs. Because of that, the typical senior spends nearly 20 percent of his or her income on health care expenses. The average out-of-pocket health care costs for a person with Medicare is about $4,600 a year.
Medicare doesn’t cover:
- Out-of-pocket health care costs including premiums, copays and deductibles.
- Dental, hearing and vision care.
- Long-term nursing home care or routine assistance with daily activities at home, such as eating, bathing and dressing. (Long-term care expenses can cost tens of thousands of dollars per year, and most people do not plan for these costs.)
Medicare: The challenges
- Funding shortfalls: The Medicare trustees report that within 12 years there will be a shortfall in the money needed to pay full benefits in the Medicare Part A Hospital Insurance Trust Fund, which helps pay for inpatient hospital care.
- A graying nation: As the population ages, many more people will enroll in Medicare. The total number of Medicare beneficiaries is expected to double — from about 40 million to 80 million — between the years 2000 and 2030.
- Fewer workers per retiree: With lower birthrates and longer life spans, the number of workers for every retiree is declining. As a result, a smaller group of workers will need to support a larger group of retirees.
- Rising health care costs: Over the past decade, health care costs have continued to grow dramatically, increasing both the overall cost of Medicare as well as the amount older Americans spend out of pocket. (A few reasons for growing costs: the rising price of prescription drugs; the use of new and expensive medical technologies; inefficient and uncoordinated care.) Although Medicare’s costs have grown more slowly than those of private insurance plans, the expenses have still outpaced inflation. This is true even though Medicare’s administrative costs — at less than 2 percent — are much lower than the 10 to 20 percent typically incurred by private-insurance plans.
- Medicare and the national budget: Medicare currently accounts for just under 14 percent of all federal spending, but it is projected to increase from $650 billion in 2012 to $1 trillion in 2022.
With so much at stake, the debate and decisions about Medicare’s future deserve close attention and active participation from the people who are receiving Medicare today, as well as by those who will count on it in the future.