Economists predict that Medicare's current 3.6% of GDP (gross domestic product) cost will jump to 6.4% in twenty years' time, mainly because the costs of medical care and medications are going up considerably faster than inflation, rather than the impact of an aging population.
There is serious concern that the present system for elderly health care in America could become insolvent for a considerable number of baby boomers when they reach 65 years of age, most of whom have paid into the system while in work.
Sixty per cent of Americans expect full coverage for their medical care when they become Medicare beneficiaries, an Associate Press-GfK survey revealed. However, the surveyors stressed that baby boomers should not expect to get full coverage through Medicare taxes.
Put simply, costs are rising too fast for Medicare taxes to cover everything.
A couple of baby boomers who reach retirement and had paid $114,000 in Medicare payroll taxes will typically require medical care costs exceeding $350,000.
AARP Vice-President, John Rother, said:
"We do need to do better at getting higher value for the dollar in all health care programs, including Medicare, and it's true that so many boomers enrolling in the program is going to add a sense of urgency to that.
But it's also true that people who are 65 and first eligible for Medicare statistically do not use much in the way of health services. It's only when they get into their mid-70s and 80s that they're likely to need intensive and expensive health care. We have some time to make adjustments."
What is Medicare?Medicare is a US Federal health insurance program that pays for medical care and hospitalizations for elderly and some disabled US citizens. The program consists of two main parts for hospital and medical insurance (Part A and Part B), and two other parts that provide flexibility and prescription drugs (Part C and Part D).
Eligible Medicare beneficiaries must be:
- Over 65 years of age
- Under 65 and disabled
- Patients of any age with End-Stage Renal Disease
Medicare is funded mainly through payroll taxes through the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act. Half of contributions are usually paid by the employee and the other half by the employer. Additional funding comes from premiums, deductibles, coinsurance, and copays.