From Apply Now,
Your Guide to Senior Health.
FREE Newsletter. Sign Up Now!

About.com Health's Disease and Condition content is reviewed by our Medical Review Board

We have been hearing the warnings about the about the financial health of the Medicare program for years, but the latest report from the Medicare Trust Fund is indeed frightening. While many thought that this was a problem that future generations would have to bear, it now appears that present seniors will be affected.

According to the trustees report the financial outlook for the Medicare Hospital Insurance Trust Fund that pays hospital benefits has deteriorated significantly from last year, with annual cash flow deficits beginning this year. These deficits will continue through the decade and explode in 2010 as the first baby boomers retire and being using Medicare. By the trustees estimates the trust fund will be exhausted (broke) by the year 2019, just as the greatest numbers of baby boomers start relying on Medicare for health care coverage.

In addition, they report that the Medicare Supplementary Medical Insurance (SMI) Trust Fund that pays for physician services and the new prescription drug benefit will require substantial increases over time in both general revenue transfers and premium charges (the monthy premium for Medicare part B is $66.60 per month for the year 2004). The premium for the new prescription drug program (Medicare Part D) is also expected to increase rapidly after that part of the program begins in 2006.

What does this mean?
Every one who is still working has money deducted for Medicare. Up until this year those payments from workers was enough to pay for the costs for hospital care for Medicare beneficiaries. Starting this year those premiums will not cover the entire cost of hospital care and Medicare will have to start dipping into its trust fund (rather like using your savings account to pay for groceries, because your income is not high enough to pay for the basics). By the year 2019 the trust fund will be empty. At that point Medicare will have to draw money from the general revenue funds (revenue from income tax that pays for government, including the military) to cover the difference between revenue from payroll taxes and expenditures. To put it in simple terms Medicare will be broke.

What does this mean to you?
If you are over 65 and presently a Medicare beneficiary you will probably be seeing some significant premium increases over the next few years. Medicare deductibles may have to increase. These items will be looked at closely by The Centers for Medicare & Medicaid Services, the agency that administers Medicare under the Department of Health and Human Services. They may also look closely at payment to health providers and limit increases or even decrease payments. This could impact the numbers of physicians willing to accept Medicare or Medicare assignment, opting to charge more than Medicare will pay (that would mean the patient would pay more).

If you are not yet of Medicare age, you would be wise to start saving more for your retirement. You may need to have a bigger cushion of funds available to help cover the health care costs that Medicare may fall short on paying. There has also been talk about raising the income ceiling on payroll taxes (presently someone earning income at the wage ceiling will pay into Medicare the exact same amount as someone earning twice as much).

What does this mean to the country?
If revenues do not increase, large federal deficits will last as long as anyone can see. Officials and individuals may have to make some very agonizing decisions over the next few years. This will continue to be a big issue for voters in this year's Presidential election and in elections to come.

What do you think?
Are you concerned? What do you think needs to be done?