The dire media reports following the release of the Medicare trustees report all painted a bleak picture of the fund’s financial health, and one headline even read: “Medicare Will Go Broke Three Years Earlier Than Expected.” Even some prominent financial advisors made similar predictions in blogs and e-mail blasts.
The “go broke” headline was referring to the report’s projection that the trust fund paying for hospital services, called the Hospital Insurance trust fund (Medicare Part A), will be depleted in 2026, three years earlier than projected in the 2017 analysis.
But the headlines are wrong, says the AARP. Like most politicians, the association prefers cost-savings fixes to the painful political poison of a legislative remedy involving Medicare benefit cuts, increased eligibility requirements or higher taxes that would hit the AARP’s 39 million members hard.
To calm the waters, AARP is arguing that, first, Medicare is not going broke. Second, the trustees report is not even saying that Medicare won’t be able to pay for hospital services, said AARP Public Policy Institute Vice President Lina Walker.
“Even if the Hospital Insurance trust fund were to be depleted, Medicare would still be able to meet 91 percent of its obligations for hospital services,” Walker said. “And, as it has done in the past, it could make adjustments to address the remaining shortfall without resorting to draconian changes to the program or imposing large costs on people with Medicare.”
Hospital services are just one part of the larger Medicare program. It also includes coverage for physician services (Part B) and prescription drugs (Part D). “Efforts to strengthen Medicare’s long-term finances should look broadly across all these components, working to improve quality of care (which actually can mean savings) and control spending,” Walker said.
“We should not overreact to the recent trustees report,” she added. “Instead, we should use it as a signal to advance what’s working from current innovations and tackle unnecessary spending in Medicare and the broader health-care system.”
Some recent innovations in payment and delivery system reforms have shown promise, the AARP said. Those strategies include ensuring that Medicare does not pay more for services based on the setting in which those services are delivered and reducing use of services that are unnecessary. The AARP and industry policy wonks term these diagnostics and treatments “low-value health care services,” which include things like doctor-ordered diagnostic imaging for a simple headache.
To save money, Medicare should also stop overpaying for prescription drugs, the AARP said. A recent government report shows that brand-name drug prices in Medicare Part D increased six times faster than the rate of inflation between 2011 and 2015.
“In particular, we need to take further steps to lower the cost of health care, especially the ever-rising price of prescription drugs,” said AARP CEO Jo Ann Jenkins. “No good reason exists for Americans to continue paying the highest brand-name drug prices in the world. High-priced drugs hurt Americans of all ages, and seniors, who on average take 4.5 medications a month, are particularly vulnerable.”