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 There's no doubt this is where Republicans will take us if they
capture control of Congress this year, and the White House in 2016.
Representative Paul Ryan, the Wisconsin Republican who chairs the
House Budget Committee, advocates “premium support” reforms that
would give seniors vouchers to buy private Medicare insurance
policies in lieu of traditional fee-for-service Medicare.
Under the latest version of Ryan's budget proposed in April,
starting in 2024 seniors could opt to buy premium-supported private
plans or stay in traditional Medicare. Ryan has argued that
introducing competition will bring down costs over time, and capping
the government's costs does sound like a tempting way to address
Medicare's financial problems.
Medicare's trustees project total annual spending will jump 78
percent by 2022, to $1.09 trillion. Much of that increase will be
fueled by higher enrollment as the baby boom generation ages.
But premium supports would shift risk to seniors, and could
effectively make traditional Medicare much more expensive by
siphoning off healthier seniors to private plans. The Congressional
Budget Office has estimated that this effect could boost traditional
Medicare premiums 50 percent by 2020 compared with current
projections.
Most seniors simply can’t afford to pay more. If you doubt it, check
out the new interactive tool launched last month by the Henry J.
Kaiser Family Foundation, one of the country's leading healthcare
research groups.
The tool analyzes the income and assets of today's 52.4 million
Medicare beneficiaries, and how their financial picture will change
between now and 2030, when 80.9 million people will be covered by
the program. It can compare different demographic slices of the
Medicare population based on variables such as education, race,
gender and marital status - and here you get a stark look at how
economic inequality affects the pocketbooks of seniors.
Kaiser's tool is based on a simulation model developed by the Urban
Institute that uses population data to analyze the long-range impact
on retirement and aging issues. I encourage you to test-drive the
tool (http://bit.ly/1zi5rMq), but here are some highlights:
INCOME
Fifty-three percent of Medicare beneficiaries had $25,000 or less in
annual income last year; half had savings below $61,400 and less
than $67,700 in home equity on a per-person basis.
The income figures reflect the sharp divisions that characterize the
wider U.S. population. Just 4 percent of seniors had income over
$100,000 last year; 27 percent had income below $15,000 (which is
just a bit higher than the average annual Social Security benefit).
Healthcare already is one of the largest expenses for seniors, most
of whom are on fixed incomes (http://reut.rs/1iQtmNG). HealthView
Services, which develops software for gauging healthcare costs,
recently estimated that a senior retiring this year in high-cost
Massachusetts would pay $7,020 in Medicare premiums alone - a number
that will jump to $11,536 in 2024. And that figure doesn’t include
co-pays and out-of-pocket costs for things Medicare doesn’t cover,
such as dental care. It also doesn’t include costs for a
catastrophic event.
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“Sixty-six thousand in savings is less than the cost of one year in
a nursing home,” says Tricia Neuman, senior vice-president at the
foundation and director of the foundation's Medicare policy program.
“That tells us that many people on Medicare today don’t have the
resources they’d need to pay for a significant health or
long-term-care expense if it should arise.”
DEMOGRAPHIC DIVIDES
Neuman says she was especially surprised by the extent of the gaps
in income and saving by race, ethnicity and gender. Median 2013 per
capita income for white Medicare beneficiaries was $26,400, compared
with $16,350 for African Americans and $13,000 for Hispanics.
Men had $25,880 in median income, compared with $21,800 for women.
And married couples were better off than singles: Per capita income
for married seniors in 2013 was $27,400, compared with $20,250 for
divorced people, $21,050 for widows and $14,150 for those who never
married.
That's unlikely to change by 2030. “The model suggests there won’t
be phenomenal changes in wealth, or that seniors will be that much
more comfortable,” Neuman says.
Neuman says the data also points to continued income inequality and
sharp divisions in the status of seniors. In 2030, 5 percent of
Medicare beneficiaries will have income over $111,900, while half
will have income below $28,250.
“There will always be a small share of the Medicare population with
sufficient wealth and resources to absorb higher costs, but most
will not be in that position," she says. "The assumption that
boomers are healthier and wealthier and that we’ll have a much
rosier Medicare outlook down the road just isn’t going to happen.”
For more from Mark Miller, see http://link.reuters.com/qyk97s
(Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance.
Editing by Douglas Royalty)
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