No big gift from Medicare

The following news item was not intended to mislead, but that could be a result. The words “large financial reserve” could easily be interpreted as a pool of cash somewhere available for use. Social Security and Medicare Part A have large reserves – fast being depleted.

Part B does not have a similar reserve. Part B claims are paid from premiums and general revenue with no limits. What happened in 2022 was that the Part B premium was too high based on adjusted expected spending which would mean that less would be used from general revenue. It’s all based on actuarial assumptions and past experience.

If the 2022 Part B premium had been left as it is for 2023, premiums and spending would again be aligned over a year or so. If the actuaries have guessed wrong – or been coerced by politics – into lowering the premium, future Part B premiums must catch up to actual spending no matter what.

A decrease of $5.20 in premiums for Part B from $170.10 in 2022 did beneficiaries no big favor. Lowering the annual deductible to $226 in 2023, a decrease of $7 from the annual deductible of $233 in 2022 simply adds to Medicare spending and is quite irresponsible. Unless it is raised in the future, it will create more pressure on premiums over time.

The reason for the reduction is a correction to last year’s hefty Part B premium increase, which was larger than it needed to be. The 2022 premium hike of about 14.5 percent was announced amid uncertainty about the potential impact of a new Alzheimer’s drug called Aduhelm, which threatened to explode Medicare costs. That didn’t happen. The cost of the drug was cut roughly in half from an original $56,000 a year and Medicare sharply limited coverage. This created a large financial reserve for Part B, allowing the program to reduce next year’s premium.

Oswego County News

The Hospital Insurance trust fund provides financing for only one part of Medicare, and therefore represents only one part of Medicare’s financial picture. While Part A is funded primarily by payroll taxes, benefits for Part B physician and other outpatient services and Part D prescription drugs are funded by general revenues and premiums paid for out of separate accounts in the Supplementary Medical Insurance, or SMI, trust fund. The revenues for Medicare Parts B and D are determined annually to meet expected spending obligations, meaning that the SMI trust fund does not face a funding shortfall, in contrast to the HI trust fund. But higher projected spending for benefits covered under Part B and Part D will increase the amount of general revenue funding and beneficiary premiums required to cover costs for these parts of the program in the future.

Kaiser Family Foundation

3 comments

  1. I suspect a larger cohort of the over 75 group passed on during the first 2 years of covid. How that affected Medicare and ssa I don’t know. But if the actuaries don’t see it, I guess it didn’t have an impact. Anyway, I believe they should adjust for the excess taken and keep the books as they would have been except for the high dollar medication non event.

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  2. I’ll bet that should have left it alone. In the private market, my premiums did not go up for the past few years, which was hard to believe with all the Covid treatments and mandates. I suspect that during 2022, people were able to get to the doctor and get the delayed treatments they needed and now costs are starting to raise again thus the increases in my 2023 premiums.

    I am wondering if Medicare is going to see the results of delay treatments reflected in the 2024 rates or did Covid reduce large numbers of the elderly to bring usage and costs down?

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