Spoto: Nursing Medicare back to health – Lowell Sun

Medicare is our nation’s largest and most important health insurance program. It is the primary source of healthcare coverage for more than 55 million elderly and disabled Americans.

Before its enactment in 1965 under President Lyndon Johnson, almost half of the nation’s seniors lacked basic health insurance, and most of them lived in poverty. After enduring two world wars, the worst economic depression in the country’s history and a lifetime of work, most seniors lived one illness or accident away from financial ruin.

Just as employer-sponsored health plans serve as the primary source of subsidized health coverage for working households, Medicare fills that role for retirees. It provides benefits to those who would otherwise be uninsured while at the same time ensuring a steady income stream to the hospitals and doctors who treat them. Medicare, in effect, transformed the elderly into paying customers which in turn supported the finances of health care providers.

Since its inception, Medicare outlays have grown steadily and rapidly. In 2016 Medicare benefit payments totaled nearly $700 billion, almost double the amount spent just 10 years before, accounting for 15% of our federal budget and 20% of total national health spending. Over the next 30 years, Medicare spending is expected to grow faster than the economy, the federal budget, wages, inflation, and tax revenues that support the program.

The Congressional Budget Office, a nonpartisan source of economic and budgetary issues, projects that total Medicare spending will again double over the next ten years to $1.4 trillion. The key determinants are the general rise in health care costs and shifting demographics, that affect the program in two ways. At the same time as the aging population will increase Medicare enrollment, there will be a decrease in the number of workers contributing taxes to pay retiree benefits. Fewer workers will be covering costs for more beneficiaries.

The rapidly mounting costs terrify policy experts and health care providers and, absent major reform, pose a threat to workers, retirees, and the program itself.

Next week, we will talk about how Medicare is financed.

John Spoto is founder of Sentry Financial Planning in Andover and Danvers. Sentry is a fee-only financial planning firm that does not work for any financial institution, sell financial or insurance products of any kind, or accept commissions or referral fees. For more information, call 978-475-2533 or visit www.sentryfinancialplanning.com