What Could be the Potential Future of Medicare?

As the election approaches, the state of healthcare in the U.S. remains one of the most talked about issues, especially when it comes to Medicare. Many beneficiaries and providers of Medicare are very concerned because the future of this healthcare provider is uncertain.

With two substantially different plans proposed by each presidential candidate, a question asked by many remains: What will Medicare potentially look like under candidates Joe Biden or current President Donald Trump?

Lindsay Engle, Medicare Expert at MedicareFAQ, clears more of the air on what Medicare’s future could possibly look like under either candidates reign.

Trump’s Medicare plan

Engle shares insight on a common misconception that President Trump’s temporary elimination of payroll taxes will negatively impact Medicare. Since the funds will be repaid, Medicare will not be affected. However, if Trump pushes to make payroll tax cuts permanent, there could be major implications.

For further explanation, President Trump recently released a memorandum that directs the Secretary of the Treasury to postpone payroll tax obligations for certain employees for four months. As it stands, the U.S. payroll tax is divided halfway between employers and employees. The current rate is 12.4% of wages total (6.2% each way) for Social Security and 2.9% (1.45% each way) for Medicare. The Social Security tax wage base limit is $137,700, but there’s no such limit for Medicare tax. Although, singles earning over $200,000 do pay an additional Medicare tax.

As Trump’s executive order applies only to the eligible employees’ taxes, the employer will still pay into Social Security and Medicare during this time, Engle explains. After the President’s order, the IRS stated the deferred taxes must be paid back by April 30, 2021. Otherwise, the employee will pay penalties, interest, and other tax additions to make up the amount.

“The purpose of this tax holiday is to provide short-term financial relief to American workers,” she says. “To be clear, the money needed for Medicare and Social Security funds will be missing, but this storm-term initiative will not deplete the federal funds. However, in Trump’s run for reelection, some fear he’ll seek to make payroll tax cuts permanent, but passing such legislation would require Congress’s approval and likely would not get much support due to potential adverse long-term effects on federal programs. While it’s understandable that beneficiaries fear the defunding of Medicare or Social Security, these programs are safe for now.”

Proposed cuts to Medicare Spending

In Trump’s budget for 2021, he proposes to cut more than $500 billion in Medicare spending through 2030, which has caused concern among current and future beneficiaries. But, without these “cuts,” government spending on Medicare would be $800 billion higher by staying on the current path, Engle says.

The the new budget attempts to reduce the national deficit, and as it relates to Medicare, that means eliminating fraud, waste, and abuse, which contribute to unnecessary spending.

“Most of the cuts to the budget affect hospitals and doctors through reductions in reimbursement rates, so it’s unlikely that beneficiaries’ benefits will be affected,” Engle says. “However, the reduced reimbursements might affect the ability of some patients to see their preferred providers since some doctors may cease to accept Medicare as a result.”

Other means to reduce spending in the proposal include requiring doctors and patients to request prior authorization for specific procedures before they take place. But many plans or services already require prior authorization, before a reduction in Medicare spending was implemented.

In addition, changes would be made to encourage patients to visit physician’s assistants or nurse practitioners as their primary doctor.

Further factors the Medicare spending cuts would affect include over $25 billion from Social Security in the next ten years, which also concerns seniors. However, the proposed reductions will not affect the retirement component of Social Security, but Social Security Income and Social Security Disability Insurance (SSDI) instead. Although, restrictions on SSDI could affect Medicare eligibility for disabled people.

Also, roughly $50 billion in savings will come from caps on graduate medical education payments, which could affect those who rely on this program.

Lastly, Trump is proposing a Part D plan reform, which aims to make generic drugs more affordable, establish a maximum out-of-pocket, and further reduce costs.

“Overall, this budget proposal resembles past efforts to control Medicare spending by targeting doctor payments,” she says. “With a house full of Democrats, it’s unlikely this will pass. Either way, a compromise is necessary to maintain funding for the Medicare program.”

The “Biden Plan”

While Biden does not plan to pursue “Medicare for All”, he intends to provide Americans with a choice for public health insurance similar to Medicare, Engle says. The goal of the “Biden Plan” is to protect and expand the Affordable Care Act, which he helped sign into law in 2010.

To achieve this, one of his proposals is to include dental, vision, and hearing benefits under his public health option, which currently are not covered by Original Medicare, she says. Those who want these benefits typically enroll in a Medicare Advantage program to receive them, which means the premiums for the public option for dental, vision, and hearing would need to be competitive with existing ancillary plans.

Biden also proposes to lower the eligibility age for the Medicare Program from 65 to 60, with enrollment optional for the first five years. This would give those between the ages of 60 and 64 the option to buy insurance through Medicare or keep group coverage from their employer. This is an attractive option to this age group as the pandemic has left many of them unemployed and uninsured, and there are a fewer opportunities for them in the job market.

“While lowering the eligibility age to 60 would provide the healthcare option to more people, it could complicate terms surrounding enrollment,” she says. “It’s unclear if any penalties will be associated with enrolling after 60, since as it stands right now, those without creditable coverage who don’t enroll when they’re first eligible need to pay late penalties through increased premiums.”

Engle says there’s also the question of if Medigap plans will be available, considering they provide coverage for the 20% of costs that Original Medicare doesn’t cover. At present, beneficiaries can use the Open Enrollment Period to choose a Medigap plan to begin simultaneously with their Part B. Biden hasn’t yet stated how Medigap plans would work under his revisions, including whether they’ll be available before turning 65 and if so, how premiums will be affected.

Another consideration for Biden’s proposal is how he will support the Hospital Insurance Trust Fund, which pays for Part A and allows those who have paid into the fund while working at least 40 quarters to receive premium-free Part A. The Hospital Indemnity Trust Fund is at risk of becoming insolvent, so lowering the eligibility age could deplete it in just a few years since more people would require coverage, she adds. Experts originally predicted this would happen in 2026, but the strain from the pandemic has accelerated the process.

Lastly, Biden plans to reduce the costs of prescription drugs for those on Medicare by allowing the government to negotiate drug prices. While this could save hundreds of billions of dollars over the next decade, it could compromise research and development, Engle explains. Biden also plans to stop drug prices from rising beyond inflation. Like Trump, Biden hopes to cap out-of-pocket costs for prescription drugs under Part D.