January
9, 2020 TIMOTHY KELLEY Senior
Contributing Editor
We’ve
been hearing the figure at least since 2011, when the first baby boomers turned
65 and became eligible for Medicare: Each day now, 10,000 Americans cross that
threshold and switch their coverage to the federal program. And unlike the
billions and trillions bandied about in our era, 10,000 isn’t impossible to
picture. Just two days’ worth of these new enrollees would fill Madison Square
Garden.
Every day 10,000 baby
boomer turns 65 and become eligible for Medicare.
What does
that number mean? For one thing, it affects a flock of other numbers. Take 60
million—the total Medicare enrollment likely to be reached this year. The
Kaiser Family Foundation says that comprises 40 million in traditional
fee-for-service Medicare and 20 million enrolled in privately managed Medicare
Advantage plans. That total was just 54 million in 2015; by 2030, according to
MedPAC, it’s projected to reach 80 million.
In
February 2019, when CMS released the annual projections of its Office of the
Actuary, Medicare’s influx of boomers was cited as a key factor to explain an
expected rise in national health spending from $3.5 trillion in 2017 to $5.9
trillion by 2027, an increase that will make health care’s large slice of GDP
even larger, increasing it from 17.9% to 19.4%. Over that decade, the agency
projects that health spending’s 5.5% annual growth will outpace that of the GDP
(4.7%), led in turn by an expected 7.4% annual growth in Medicare spending. CMS
cites two reasons for torrid growth: “sustained strong enrollment as the baby
boomers continue to age into the program” and “growth in the use and intensity
of covered services that is consistent with the rates observed during
Medicare’s long-term history.”
Baby
boomers surge into Medicare
Ranks of
the Medicare eligible are expected to balloon till 2029 when the last of the
baby boomers turns 65.
Source: MedPAC, Health Care Spending the
Medicare Program, A Data Book, June 2019
Does this
“use and intensity” mean a too-extravagant Medicare is in need of an overhaul?
A February 2019 Urban Institute report says no. CMS data, the report contends,
show that enrollment increases are largely responsible for the high rates of
spending growth in Medicare and Medicaid over about the last 10 years, and that
these programs’ per-capita spending growth was actually below that of private
insurance. The report even gave a friendly wink to Medicare for all, noting
that the data “may actually provide some support for efforts to expand public
programs or borrow some of their cost containment strategies for use in the
private sector.”
But there
is a but. CMS does project significant increases in per-enrollee spending in
the coming years because of rising drug prices and a hotter economy, the Urban
Institute report points out, noting that this projection fits with a view that
recession and a slow recovery contributed to slow growth in the recent
past.
Still,
the report also sounds a hopeful note about future cost control, speculating
that aggressive payment programs by Medicare may have reduced revenue flows to
providers sufficiently to cause adjustments in cost structures.
Then
there’s both an onion and an orchid for MA plans. A recent shift of recipients
to such programs has sparked a rise in Medicare administrative costs, according
to the Urban Institute. On the plus side, the report says that “some recent
evidence on Medicare Advantage suggests that these plans have been successful
at lowering costs without sacrificing quality.”
Why is
Medicare spending headed north?
Enrollment
is increasing at a faster rate than spending per enrollee.
Source: Urban Institute, Slow Growth in
Medicare and Medicaid Spending per Enrollee Has Implications for Policy Debates,
February 2019
Considering
what’s coming, they’ll need to work that magic big-time. A December 2017
Commonwealth Fund report noted a Congressional Budget Office estimate that
annual net Medicare spending—that is, “mandatory spending minus income from
premiums and other offsetting receipts”—would more than double in the ensuing
decade, increasing from $584 billion last year to $1.2 trillion in 2027. It
also threw in an expectation that per-enrollee costs would rise “as new tests
and treatments with high price tags become available.” The Commonwealth Fund’s
point back then was that the giant Republican tax cut then proposed would make
an already unsustainable situation even worse. “The tax bill aside,” warned the
foundation, “Medicare is not adequately funded.”
Indeed,
those daily grey armies are helping to push the program rapidly into the red.
MedPAC has projected that by 2027 just 2.5 working-age Americans will be
striving to pay the tab for each Medicare beneficiary, compared with 4.5 in the
’70s. Little wonder, then, that projections show that Medicare’s hospital
insurance trust fund will be insolvent by 2026. We’ve seen this movie before,
of course; previous looming insolvencies have prodded Congress into last-minute
action with payroll tax hikes or other adjustments. But this time the challenge
may be tougher.
You know
things are dire when people start publicly criticizing themselves. “I don’t
think we’ve taken enough bold steps to move this curve,” said MedPAC
Commissioner Warner Thomas of New Orleans’ Ochsner Health System about his
commission in September, according to published reports.
One of
Thomas’s fellow commissioners, Brian DeBusk of Powell, Tenn.-based DeRoyal
Industries, suggested possible solutions by way of a cheery metaphor. He
likened fee-for-service Medicare to an automobile on which extensive tinkering
had yet to accomplish repair. “Ultimately it’s going to take a new car,” he
said. “Maybe it’s innovation on the Medicare Advantage side, maybe it’s a
next-generation ACO, or maybe it’s one of the new contracting models.”
Whatever
the response of government or the market, the 10,000-a-day influx of new
Medicare recipients isn’t scheduled to abate till 2029, when those born in 1964
bring up the rear of the baby boomers reaching age 65. Till then these folks are
going to keep coming, and chances are—they’re the Woodstock-era kids, remember?
— they won’t come quietly.
https://www.managedcaremag.com/archives/2019/11/march-boomers-daily-armies-new-seniors-swell-medicare-ranks
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