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MedicareAs the Obama administration announced recently in the government’s annual report on the 2 programs Medicare and Social Security, Medicare’s financial condition has improved in the last year, partly due to the Affordable Care Act. However, the same cannot be said of Social Security that practically remains unchanged. Medicare’s hospital insurance trust fund will be used up in 2030, 4 years later than the earlier projected figure. However, SS fund will be exhausted in 2033, as expected last year.

Issues Identified

One of Medicare problems is related to healthcare spending, which was found to be growing faster than the overall economy. Though there is a slowdown in healthcare spending in recent times, the exact reasons for this change remain unknown. However, healthcare experts opine that even if the healthcare spending can be kept at pace with inflation, Medicare’s demography related problem is hard to solve. The program provides coverage for everyone above the age of 65. With a growing population of aged people, Medicare’s burden also increases. The program is enrolling more people (around 10,000 new beneficiaries) this year and if the number goes up it will have to struggle to pay for coverage.

Even though the report says Medicare’s Part B monthly premium for outpatient care is estimated to remain unchanged ($104.90) for 2015, average premiums for prescription coverage are projected to increase by less than $2 per month. The hospitalization deductible is also expected to rise to $1,248 in 2015 – an increase of $32 compared to this year.

According to the report, the disability trust fund is expected to be exhausted in two years. It is estimated that this program will be able to collect only enough payroll taxes to pay 81 percent of benefits by that time unless the government acts right. Medicare will be able to collect enough payroll taxes to pay 85 percent of inpatient costs when the hospital trust fund is expected to get exhausted in 2030. The report estimated a 1.5 percent increase in monthly Social Security payments to beneficiaries next year, which would be the lowest among the automatic adjustments adopted in the 1970s. It was also stated that the increase will be based on a measure of inflation by government. Around 58 million beneficiaries are estimated to receive Social Security benefits with 41 million retired workers and dependents, 11 million disabled workers and 6 million survivors of deceased workers.

A Solution Can be Worked Out

Overall, the report suggests both Medicare and Social Security continue to face long-term financial problems though such a situation is not imminent. This may affect the quality of care as more costs will be shifted to the patients. When faced with a situation in which higher payments have to be paid from their own pockets, patients may switch to less expensive genetic drugs or postpone a particular test or an elective procedure. Though the Affordable Care Act (ACA) introduced several developments to restructure Medicare such as creating incentives for doctors and hospitals so that they can keep their patients healthier by managing those having chronic health conditions closely, it will take time to determine the effects of those changes.

Experts say if the two trust funds were combined, both the programs would have enough money to last until 2033. They also opine benefit reductions, tax increases or a combination of both will be required to avoid future cutbacks. However, the President has made it clear that he will not support any proposal that would drastically affect Americans who depend on these programs or that would deny benefits for future retirees. However, the trustee report suggest that lawmakers should address the challenges associated with both programs as soon as possible and take the right action in a timely manner so that the public will get enough time to prepare for the change.