Truth #3: Medicare is Not “Free”


https://www.linkedin.com/pulse/truth-3-medicare-free-denny-weinberg/

by Denny Weinberg

Someone Is Paying For The Whole Thing, You Know

The “Free-ness” of Medicare, like many other commodities, comes down to two important metrics discussed here; Cost, and Price.

Cost:

  • Costs for Medicare include all payments to hospitals, doctors, pharmacies, labs, imaging centers, etc.
  • Costs for Medicare also include amounts paid to 12 private companies contracted regionally to manage and administer the Medicare Program. (i.e. claims, payments, providers, appeals, inquiries, education, medical records, etc). These critical administrative functions have been outsourced to the insurance industry and its affiliates for many years.
  • Finally, Medicare costs include payments to dozens of private insurance companies who provide private alternatives to Medicare, such as Medicare Advantage PPO’s and HMO’s.

Price:

  • Current projections are that Medicare costs will increase about 5% per year and prices will have to increase much more than that to keep the program from insolvency in the next few years.
  • Most adult Americans (including many that are also beneficiaries) pay varying portions of this price through special taxes, depending upon their type and amount of income.
  • If a Medicare beneficiary has also chosen to take Social Security income (most do), varying portions of that price are mandatorily deducted from that Social Security income as well, automatically.

So What Does It Really Cost and How Much Is The Real Price?

In 2017, the Medicare program made over $700 Billion in Payments to private insurance administrators and care providers for Traditional Medicare or for alternatives (Medicare Advantage). That year, about 58 Mil beneficiaries were enrolled in the program. The result is a cost for each Beneficiary of just over $1,000 per month. In 2019 that cost and related price will both be higher due to inflation.

But the beneficiary share of that price also varies widely based upon several factors. Those include income, the number of qualifying years of employment and whether Part B or Part D (coverage for Doctors and Prescriptions) is chosen or waived. (This will be further offset by the amount [if any] of Social Security income deducted first).

Given all that, Medicare Prices for 2019 range as follows:

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So Is Medicare Free?

When you consider a program that on average costs over $1,000 per beneficiary per month …

… Then knowing that a substantial part of the needed price is covered by the tax on virtually all workers and other income earners …

… and since many beneficiaries may not rationalize the substantial dollars being stripped away from the (unrelated) Social Security payments to help pay their share of the price

… and considering that a material number of beneficiaries have incomes over $85,000 per year (many still work) …

… and finally, comparing all the components of coverage Americans have received when younger and working (Hospital, Physician and Prescriptions) …

… These numbers, taken together, for many people are certainly not free.

 

 

 

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