As the country’s Medicare program nears insolvency, President Joe Biden and Democrats in Congress announced a multi-trillion spending plan including expansions to the country’s Medicare program.
Though Medicare’s budget insolvency is predicted to occur as soon as 2026, the Biden administration pledged to increase Medicare spending, adding dental, vision, and hearing coverage to the program—creating a deficit that can only be covered by raising taxes and reducing access to care.
Out of Money, Time
Medicare is the federal health insurance program that covers care for people age 65 or older, people with certain disabilities, and people with end-stage kidney disease.
Medicare Part A covers hospitalization and is generally premium-free. Once funding runs out, as trustees predict will happen in 2026, Medicare would only be able to cover 90 percent of promised benefits. Each year the problem remains unresolved, payments would decrease, and Medicare beneficiaries would lose more benefits and services.
“Insolvency, simply put, means the trust runs out of money,” said Robert Klein, a healthcare advisor and policy advisor to The Heartland Institute, which co-publishes Health Care News. “The 2026 date may be static, shortened, or extended. Either way, if the fund runs out of money, taxes will have to go up, reimbursements to hospitals will be cut and/or delayed, and it will hurt the bottom line of hospitals.”
‘No Real Benefit’
Robert Moffit, a senior fellow at The Heritage Foundation, says insolvency will undoubtedly hurt the health care industry.
“The results are simple,” Moffit said. “Providers will see even deeper cuts in Medicare reimbursement and beneficiaries will have access to fewer medical services under the hospitalization program.”
The shortfall could spill over into Medicare Part B, says Klein, which is funded by enrollee premiums and tax dollars and covers outpatient care, medical supplies, and preventive services.
“Even with Medicare offering these services there should be no real benefit seen to the consumer as all it will do is drive up the price of these services for all,” Klein said.
Medicare Deficits Impact All
As it stands, the Medicare program is already grossly underfunded: the total of unfunded liabilities in Medicare and Social Security is $96 trillion, an amount that will be owed over the next 75 years, according to RealClearPolicy. There is no way to cover an expansion of benefits without the next generation covering the costs.
“Many Americans have to dip into their pockets to pay what Medicare doesn’t cover now,” Klein said. “Expanding benefits will cause premiums to rise. If you are collecting Social Security, your premiums for Part B, plus any applicable surcharge for higher-income earners on Parts B and D (prescription benefits) must be deducted from Social Security. Keep raising Medicare premiums, and you will decrease Social Security benefits. Considering most Americans don’t have a pension, eating more into a guaranteed monthly income benefit will hurt them.”
Retirees would not be the only group affected; working families paying for private insurance plans will likely shoulder increasing costs as well, Moffit says.
“If Medicare tries to control costs by cutting back on provider payments, which it has done so often in the past, it will likely stimulate an even greater cost shift to private and employer-sponsored health plans. That means private insurance premiums for working American families will go up,” Moffit said. “Alternatively, if Washington decides to maintain its already tough price controls on Medicare Part A services, more nursing homes, home health care agencies, and even hospice agencies will start running in the red.”
Buying Trouble
Allowing younger people to enroll in Medicare or to expand Medicare to cover dental, vision, and hearing services will buy trouble, Moffit says.
“It is irrational for the President and Congress simply to add Medicare benefits and services and thus increase beneficiary and taxpayer obligations without also taking measures to control beneficiary and taxpayer costs,” Moffit said.
The current strategy to deal with shortfalls has been to cut reimbursements, cut benefits or continue current spending and passing debt on to future generations. Congress has gotten very used to ignoring the trustees’ report, Moffit says.
“In my experience in Washington, now more than four decades, I am not surprised that politicians get cold feet even at the prospect of talking about change in Medicare,” Moffit said. “It is easy to demagogue the issue because few really understand how it works nor the consequences that will befall the country if officials Washington continues to do nothing.”
Widespread Impact of Expansion
Medicaid is costly even to those who benefit from the program thanks to taxes and surcharges, Klein says. Additionally, people often must buy so-called Medigap insurance to cover what Medicare doesn’t.
“It’s not a free program,” Klein said. “You pay payroll taxes for the Part A hospital fund while you are working and you pay premiums for the insurance for doctors and out-patient services, Part B, and prescription drugs, Part D. If you earn too much money in retirement, Medicare tacks on a surcharge to your B and D premiums.”
Expanding Medicare in any shape or form would impact the entire marketplace, Moffit says.
“There is no such thing in this universe as ‘something for nothing,’” Moffit said. “There is nothing wrong with Medicare or any health plan adding or subtracting benefits within a fully competitive environment where the consumer has the right to choose what health plans and benefits they want or need.”
‘Competition Controls Costs’
An expanded Medicare can crowd out the private market, which will violate a fundamental economic principle, Moffit says.
“The record is clear, competition controls costs and delivers better value for health care dollars,” Moffit said.
The move to expand Medicare benefits is a march towards single-payer health care, says Dean Clancy, a senior policy fellow with Americans for Prosperity.
“Senator Bernie Sanders has become very important in this spending spree,” Clancy told the Heartland Daily Podcast. “He is the loudest voice for what he calls ‘Medicare for All,’ but most of us would call single-payer, or simply a government takeover of healthcare.” (See related commentary.)
Ashley Bateman (bateman.ae@googlemail.com) writes from Virginia.