By: Dan Reed, American Citizen
Conservative politicians
constantly complain about Medicare and campaign on why Medicare needs
significant reforms. These same politicians falsely say that
Medicare spending is draining the U.S. Treasury. Based on these claims, I decided to
investigate.
The following three-part report
reviews the existing Medicare Program, outlines the Republican Medicare Reform
proposals, and compares the costs of the FICA Medicare system with the costs of
Private Health Insurance.
Medicare: Program, Financing, and FICA Trust Fund
For three decades politicians,
business interests, and media people have presented a drumbeat of negative
misinformation about Medicare, which has caused some people to believe that Medicare
is welfare for seniors, and generational thief! So I begin this three part
series with an accurate overview of: why Medicare was established, what makes
up Medicare parts A, B, C, and D, how Medicare is really financed, and how the
Medicare FICA trust fund operates
Medicare Program
President Lyndon B. Johnson signed Medicare into law on July
30, 1965. Medicare is a social
insurance program administered by the Federal Insurance Contributions Act
(FICA), which was established in 1935 as part of legislation that created
Social Security. Medicare was established to solve a problem between the high
costs of private medical care, combined with old peoples generally low retirement
incomes!
Medicare provides health insurance coverage to people over
the age of 65, people under 65 who are permanently disabled, and people who
meet other special criteria. The Medicare program also funds residency-training
programs for the vast majority of physicians in the United States. Medicare
benefits are grouped into four coverage categories: Part-A, Part-B, Part-C, and
Part-D, with each being funded in a different manner.
Medicare Financing
Medicare covers 80% of Medicare-approved medical cost, with
the remaining 20% being paid by either the Medicare recipient, or a
“supplemental insurance plan” purchased from a private Health Insurance
Company.
Financing
Medicare - Medicare is partially financed by payroll taxes collected by
the Federal Insurance Contributions Act (FICA), and the Self-Employment
Contributions Act of 1954. The Medicare payroll tax rate is 2.9% of the
gross wages, salaries and other employment compensation, which is split between the employee and employer. Self-employed
individuals must pay the entire 2.9% tax on net earnings, but may
deduct half of the tax from income when calculating their income tax. High-income Social Security beneficiaries also pay income tax
on their Social Security income, some of which goes toward Medicare. Beginning
in 2013, the 2.9% hospital insurance tax will apply to the first $200,000 of
income for individuals or $250,000 for couples filing jointly, and will rise to
3.8% on incomes in excess of those amounts.
Medicare
Part A – Covers hospital benefits, and is financed from FICA
payroll taxes collected from employers (1.45%) and employees (1.45%). About 99%
of Medicare beneficiaries do not pay a Medicare Part-A premium because they
have earned least 40 quarters of Medicare covered employment. Those individuals
with 30 to 39 quarters can buy into Medicare Part A at a monthly rate of $248
to $450.
Medicare
Part B – Covers doctors, treatment, and medical equipment
costs, and is partially financed with $110 monthly fees withheld from each
retirees monthly Social Security check, and co-pays. These fees cover approximately
25% of Part-B Medicare benefits. General revenues of the Federal Government
subsidize the balance of Medicare Part B benefits.
Medicare
Part C – With the passage of the Balanced Budget Act of
1997, Medicare beneficiaries were given the option to receive their
Medicare benefits through private health insurance plans, instead of through
the original Medicare plan (Parts A and B). These programs were known as
“Medicare + Choice” or “Part-C” plans. Pursuant to the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, “Part-C” plans were made more
attractive to Medicare recipients by the addition of prescription drug coverage
and became known as “Medicare Advantage Plans”. Medicare Advantage plans
are required to offer coverage that meets or exceeds the standards set by the
original Medicare program. Medicare Part-C is partially financed by insurance
premiums withheld from each participating retirees monthly social security
check. General revenues of the Federal Government directly subsidize each
private health insurance company that provides Medicare Part C benefits.
Medicare
Part D – Insurance premiums are directly paid to private
insurance companies by Medicare recipients, for either a stand alone prescription
drug plan, or as a portion of the premium for their Medicare Advantage plan.
General revenues of the Federal Government partially subsidize Drug companies
that provide Medicare Part-D benefits.
The FICA Trust Fund
The FICA is a solid non-profit organization, with a 76-year
history of efficiently administering both the Social Security and
Medicare Trust Funds! All FICA Medicare collections go into a trust fund, which is used to pay doctors, hospitals and private insurance companies when Medicare
patients use their Medicare medical benefits. The FICA administers both Social Security and Medicare. Because of this “dual role”, FICA
administrative costs are about 30% less than those of private health insurance
companies.
Republicans and the media continue
to “Label Medicare an Entitlement”, like government provided welfare. This
is hogwash! The truth is Medicare Parts A, B, C and D,
which provides health care for more than 45 million American seniors are
partially paid by lifetime payroll tax deductions, partially paid by retirees monthly
Social Security withholdings, and partially subsidized by federal tax revenues!
Republicans falsely claim that Medicare already consumes about (12.5%) of
federal spending, and “costs” are set to explode as the baby boomers begin
retiring in 2011! Again, this is hogwash! Republicans only mention the spending side! They conveniently omit monthly payroll tax collections and existing Medicare FICA trust fund surpluses. The Medicare FICA trust fund has taken in more than it paid out for
years, and currently has a “surplus” that will last until 2024!
Does anyone ever question
why progressive politician’s claim Medicare is solvent through 2024, while conservative
politician’s claim Medicare is almost broke? The American people need an
accurate AUDIT before any Medicare Reform is undertaken!
- How much has been collected by FICA Medicare
payroll taxes since 1965?
- How much has been collected from retirees Social
Security checks since 1965?
- How much will be collected from the FICA Medicare
payroll taxes in the future?
- How much will be collected from future retirees
Social Security checks?
- How much has been paid out of the FICA trust fund?
- How much additional revenue is needed to balance
Medicare spending, Medicare trust fund surpluses, future FICA payroll tax
revenues, and retirees withholdings?
Without
this “AUDIT”, Republican hype about Medicare spending is just pure crap!