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It’s Always Good News/Bad News

Medicare News and Updates:

Understanding the Current Scenario Good News for Medicare Beneficiaries Reduction in Part D Out-of-Pocket Cap​

Life seems to always be good new and bad news.  However, it’s not a balanced position when we are talking about Medicare.

Typically I like to start with bad news first. Then everything else is ah-mazing.  But in this case, I’ll change my habit.  The good news is that the Part D (pharmacy plan) of Medicare will have an annual out of pocket cap of $2,000 starting in 2025.  This is being reduced from the current annual OOP cap of $8,000.  The $6,000 difference for people on Medicare with Part D plans is substantial!  People over 65 are typically living on reduced incomes, and see increased expenses in all medical costs due to more prescriptions and higher healthcare costs – we all just start to fall apart.  And our for-profit healthcare system treats everyone like the bionic man or woman “ we have the technology.  We can rebuild him”.  So having some additional money in their pocket is great.  Maybe not

Bill Passed to Limit Payments to Hospitals

Another piece of good news although a little more technical…In December of 2024 the House of Representatives passed a bill that would limit payments to hospitals and hospital owned doctor groups for certain treatments.  As of now, usually everything costs more in a hospital setting than it does in a doctor’s office or on an outpatient basis.  For example, a person being treated with chemotherapy in a hospital is typically 3-4 times more expensive than if that person was being treated in a free-standing infusion center.  Crazy.  Same drug, same nice nurse administering the drug and making the patient comfortable.  The same awful side effects of that drug – so why should the cost of administering this therapy cost 3-4 times more?  Great question!  Yeah it shouldn’t.  Just this minor tweak is expected to save about $3B (with a B) to Medicare spending.  Why is that good news?  Well this will all make sense in a sec. Lower spending and reduced costs in Medicare should help to drive down Medicare premiums which is good for Medicare and its consumers. We should really talk about putting our healthcare system on Ozempic (but it won’t be covered-inside joke).  Any reduced fat that can be removed from the system should be.  And the healthcare system would still make money.

The Bad News:

Underfunding of Social Security and Medicare

Now the bad news – and this we have known for quite some time but for some reason choose to pretend not to know.  Ready?  Social Security and Medicare will be underfunded by 2034.  Oohh.  That’s only 10 years from now.  The same amount of time that apparently all of us will be driving electric cars but won’t have enough energy or charging stations to plug them all in.  (Hmm.  Do I see a recurring problem in this country?)

WSJ did a video series recently (link below) that was really well done on Social Security and updating it’s demise story.  Over 4M Americans will turn 65 in 2024.  The largest group in history all celebrating the BIG 65 at the same time.  But without enough younger people paying into the system, there’s not enough money in the bank to handle this.  When any company’s “costs” are continually less than it’s revenue – that is usually not a good sign the company can keep it’s doors open.  Even a first year Econ student understands that.  Why am I chatting on about Social Security?  Medicare and Social Security are linked.  They get paid out of the same “bucket”. In 2019 Medicare represented 76% of the total Social Security budget. By 2040, Medicare is actually expected to cost more than SS benefits by 5-7%.  I think that is lowballing it.  I am not sure that everyone understands this.  While they are technically “separate benefits”, the benefits get paid out of the same budget.  Make sense?

Balloon Animal Economics: The State of Medicare

Understanding the System

Okay – so back to good news/bad news/ but not for Medicare and why this makes no sense. Think of balloon animal economics.  When you blow up the long skinny balloon, you have a finite amount of air in the balloon.  When you twist the little part for the wiener dog’s head, the displaced air puffs out so you can make the dog body, dog legs – you get it.  You can’t add more air to create the cute little doggie – you just move the air around and when you squeeze in one place, it comes out another.  Without a bigger balloon (more air) it’s hard to take that weiner dog and make it a large flamingo.  

The Current State of Medicare: A Stretched Balloon

So we have a system that has not had any major revisions to it for 40 years.  We have healthcare costs eating it alive.  Congress is afraid to touch this issue politically.  And apparently any person at CBO or on the Hill over the last 15 years involved in budgeting learned “new math” in school.  Which is why this is so “f’d” up.  I had to make it through Algebra class – why didn’t these people.  What morons really think that gee, if we live longer, pay out benefits 20 years more than anticipated to more people with the cost of these covered benefits rising faster than inflation, with no mechanism for leveraging the supply chain or investing the money in a meaningful way – we are going to be just fine?  Yep, morons by the very definition.

And now at the same inflection point, dazzle participants with reduced out of pocket costs on medications that will cost this same bankrupt (although really not bankrupt depending upon which financial analyst you speak to) okay let’s say overdrawn –  program $9B more in claims.  (1.5M people hit OOP max on drugs in 2019 X $6000 per person savings = $9B.  Just doing the math for the new math people).  So, for balloon animal economics people, we have a large flamingo (Medicare) with only enough air (money) for a small weiner dog.  

The Way Forward

So yes, the good news for those Part D enrollees, less exposure and some money in their pocket. But how can we improve benefits and costs and reduce the spend?  Age old problem.   We won’t do it this way.  Medicare is on the verge of going away.  It cannot continue with this type of funding system.  It MUST change.  These little perks here and there that make people feel good about Medicare, don’t address the bigger problem.  In fact, these perks exacerbate it.  Look over here so you don’t really look here!  Good news?  There isn’t really any if we are talking long term about the financial viability of the Medicare program unless we fundamentally fix it based on today’s information, data and with people that know how to add.  That’s the bad news.  The bad news makes no good news on this topic, ah-mazing at all.

Watch How 2024’s Record Retirement Numbers Could Spark a Recession | WSJ

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