^{Posted on July 27, 2004}

Medicare empowers patients to enjoy financial hardship

Department of Health and Human Services
Centers for Medicare and Medicaid Services (CMS)
Office of the Actuary
July 2, 2004
Letter (excerpts)
From: Sol Mussey, Director of the Medicare and Medicaid Cost Estimate Group of the Office of the Actuary

To: The Honorable Pete Stark of the Subcommittee on Health, Committee on Ways and Means

Table II.C14 was not included in the 2004 report… The attached table provides the information you requested in the same form as Table II.C14 from the 2003 report. The out-of-pocket payments for parts A, B and D of the Medicare program are shown as a percentage of an illustrative 65-year-old’s Social Security benefit. Also shown are the Medicare out-of-pocket payments for the same illustrative beneficiary 20 years later at age 85.

For the purposes of this table, an illustrative beneficiary is defined as (1) paying the standard Part B premium, (2) paying the average Part D premium, (3) incurring the average level of copayments for all aged beneficiaries each year, and (4) receiving a monthly Social Security benefit at age 65 equal to approximately the average benefit for all OASDI beneficiaries in the year shown, with the standard OASDI benefit increases applying in subsequent years.

http://www.familiesusa.org/site/DocServer/CMS_data_on_Medicare_oop_costs.pdf?docID=3963&JServSessionIdr012=lkg0yrebn2.app27a

Comment: The tables attached to the letter demonstrate that the average 65 year old Medicare and Social Security beneficiary this year, 2004, pays 18.6% of his or her Social Security benefits as out-of-pocket expenses under the Medicare program. The percentages continue to increase each year.

By 2065, the average 85 year old will pay 100.2% of his of her Social Security benefits as out-of-pocket expenses under the Medicare program. In fact, by 2078, even the average 65 year old will be paying 97.0% of Social Security benefits as out-of-pocket expenses under Medicare. At the start of retirement, the Social Security check is already wiped out.

Note that these are average values. For individuals with greater health care needs, the Part B and D out-of-pocket expenses and copayments will dramatically increase. In spite of Medicare, medical bills will wipe out Social Security income for these individuals at a much earlier date.

We are rapidly entering a phase in health care financing in which costs are being shifted to those with greater health care needs. This is being accomplished through polices such as defined contribution funding, higher deductibles, greater coinsurance and copayments, and manipulation of benefits covered. The conservative agenda is to shift medical costs from pooled resources with risk sharing to “empowered” individual health care consumers who can then take control of their own health care. The obvious flaw is that individuals with greater health care needs have no empowerment if they do not have adequate access to pooled insurance funds.

In the private sector, individual plans and many group programs are rapidly shifting to these policies that are designed to keep premiums affordable by shifting costs to patients. But the tragedy demonstrated by the tables, attached to the Office of the Actuary letter, is that the conservatives in Congress, with the support of the current administration, have been successful in converting our one program of social insurance, Medicare, into a “consumer-driven” product that will not provide financial security for those with significant health care needs.

But there is also an ethical issue here. The administration was blatantly dishonest in deleting these important tables from the 2004 Medicare Trustees’ Report. And yet the polls indicate that half of our nation wants more of this. My national pride has suffered a staggering blow. How could we… ?