Medicare Compliance & Reimbursement

It's unavoidable, as health-care costs rise faster than U.S. earnings.

Over the long term, both the benefits Medicare enrollees receive from Part B and the Part B premiums they pay will grow much faster than the Social Security checks that many use to pay their Medicare bills. In fact, that's been the case over the history of the program, notes the annual Medicare Trustees' Report issued March 23.

The Social Security benefit grows at about the same rate as average U.S. earnings. But health-care costs in general grow much faster, and physician spending, in particular, is growing at a very high rate.

In 1970, for example, Part B benefits equaled about one-twelfth of the average enrollees' Social Security benefit. By 2004, Part B benefits had grown to about one-third the size of the benefit. Under CMS actuaries' intermediate-growth projections, Part B benefits could exceed the average Social Security retired-worker benefit after 2050.

While increases in the cost of Part B benefits threaten to drain the federal budget, increases in premiums and cost-sharing threaten to drain consumers' wallets. The average Part B plus Part D premium is estimated to equal 13 percent of the average Social Security benefit in 2010, increasing to an estimated 30 percent in 2070.

Average cost sharing in 2010 is expected to equal 22 percent of the Social Security benefit, increasing to over 50 percent in 2070.

It's that sort of statistic that drives analysts to sound alarms about the potential danger of unchecked costs.
 
There are two possible ways in which Medicare cost growth will be slowed, head actuary Rick Foster told the American Enterprise Institute's annual symposium on the trustees' report.

One scenario: "We get serious. We try to address the issues. We do it in an orderly fashion, and it pays off," Foster explained.

The second possibility: A spending slowdown "can happen all by itself," Foster said. If costs continue rising at current rates, within a few decades many beneficiaries will have so much trouble affording their premiums and cost-sharing responsibilities that they'll simply forgo care.

It's a similar scenario to what's happening in the employer market today, as more workers forgo coverage - even when insurance is offered to them - because it costs too much, Foster said.