Medicare … now that’s a different story

The other day, I wrote that the Social Security shortfall was no reason to panic.

But Medicare … that’s a different story.

Medicare is the government’s program that will pay a big chunk of your medical expenses after you turn 65. Medicare’s trust fund is mainly financed by payroll taxes. Beneficiary premiums make up less than 2%.

The problem: As more people retire and sign up for Medicare, more workers are needed to kick in payroll taxes. Then when you mix in longer life expectancies and soaring medical costs, you have a tsunami of red ink that can’t be stopped.
You can read the Summary of the 2011 Annual Reports. But I think the chart below tells the story.

As you can see the Medicare trust fund (HI) will be broke by 2024. That’s 5 years earlier than was shown in last year's report!

This assumes an almost 30 percent reduction in Medicare payment rates for physician services by 2012 as required under current law.

I know a few doctors. And if I want to push their hot buttons, I just have to bring up Medicare. Delayed payments … retroactive reductions … these guys can go on for hours. And to think they’re going to sit on their hands while Washington cuts their income is plain fantasy.

They’ll lobby hard to squash any further reductions, which could mean the trust fund could go bust earlier than expected.

Or … they’ll stop accepting Medicare patients, which could mean you would have to find another doctor or pay out of pocket.

Either way, you lose.

So what can you do?

Obviously getting in shape and maintaining good health will help. Also check with your employer’s health insurance plan. Some will let you continue after age 65 as long as you work fulltime and pay a higher premium.

Look into supplemental Medicare plans, too. If the government starts cutting benefits or making benefits harder to get, these plans could become more important in making sure you get the best medical care possible.

And don’t forget to put together a strategy for long-term care. Medicare doesn’t pay much now. Further cuts are almost sure to include shifting more of the burden to you.

Best wishes,

George