Medicare turned 50 last week so let’s talk about what the next 50 years might hold.
Medicare, the federal health insurance program for the elderly and disabled, has come a long way since its creation in 1965 when nearly half of all seniors were uninsured. Now the program covers 55 million people, providing insurance to one in six Americans. With that in mind, Medicare faces a host of challenges in the decades to come. Let’s talk about Medicare financing for a minute.
While Medicare spending growth has slowed in recent years – a trend that may continue into the future – 10,000 people a day are becoming eligible for Medicare as the trend-setting baby boomers age. Yet the number of workers paying taxes to help fund the program is decreasing. That means Medicare will consume a greater share of the federal budget and beneficiaries’ share of the tab will likely climb. An abundance of proposals to curb federal expenditures on Medicare exist. They include increasing the eligibility age, restructuring benefits and cost-sharing, raising the current payroll tax rate and asking wealthier beneficiaries to pay more for coverage.
I believe Medicare will evolve to a defined contribution program similar to the health insurance exchanges but with a twist. My prediction is over time Medicare will start to privatize and seniors will be given a stipend by which they can “purchase” Medicare coverage. The stipend will be based on income and the stipend amount will cover the cost of basic Medicare coverage and beneficiaries will have the option of paying out-of-pocket for additional coverage.
That’s a prediction not a guarantee, the only guarantee I’ll make is that Medicare will be very different at age 60, 70, 80, 90 and 100. Stay tuned I’ll post a few more thoughts in the coming days.