Every changing of the guard in Washington sets our wallets on edge. Regardless of political persuasion, everyone wants to know how the new order will impact our personal finances. Since Donald Trump’s election, most of that speculation has centered on Trump’s tax plan, which would reduce income taxes for most Americans.
But for older Americans a possibly more important issue is potentially on the chopping block: the fate of Medicare. While candidate Trump repeatedly promised not to change the wildly popular medical insurance program, Republicans in Congress seem to be gearing up to radically overhaul Medicare and Trump has sent at least one signal that he may be open to those changes — maybe.
Let the games begin.
Medicare, which began in 1965, currently provides health care coverage to more than 55 million Americans, most of them 65 or older. In recent years enrollment in the program has increased by about one million annually as Baby Boomers move into retirement. Since its inception, Medicare has been a “defined benefit” program offering a set level of coverage. It currently pays about 80% of the cost of doctor and hospital visits. Medicare Part D, enacted under Republican George W. Bush, added varying levels of coverage for prescription drugs. Medicare participants pay monthly premiums, co-pays and annual deductibles.
What is the alternative?
Congressional Republicans would want to essentially privatize Medicare. The GOP plan, championed by Speaker of the House Paul Ryan, would give Medicare participants a set amount of money to buy coverage from private insurers. It would also push the Medicare eligibility age from 65 to 67.
Ryan, a ferocious budget hawk, hopes his plan will limit government spending on Medicare, which currently accounts for a whopping 15% of the federal budget. That figure is expected to rise as more and more Boomers hit 65. Ryan contends that without a drastic overhaul, Medicare won’t be around for the next generation of retirees.
But critics contend that the GOP plan would diminish current coverage levels and place a burden on lower-income Medicare participants. They question whether the payments offered to buy private insurance will keep pace with the every rising cost of such coverage. While the GOP plan would allow participants to stay in traditional Medicare, those who oppose the proposal suspect Republicans would steadily increase participants’ out-of-pocket costs, thus pushing them into private plans.
What’s the likelihood that Medicare will go away?
Even critics of the GOP plan acknowledge that we need to get Medicare’s costs under control. But they suggest other steps, starting with allowing Medicare to negotiate drug prices with pharmaceutical companies, something that was expressly prohibited in the legislation creating Medicare Part D. Drugs currently account for one-sixth of Medicare’s expenditures. In a recent survey, 80% of Americans expressed support for that initiative, as did candidate Trump. Unfortunately, House Republicans – despite their belief in market forces — have long opposed allowing such negotiations. The powerful pharmaceutical lobby also opposes the idea, needless to say.
While Medicare revamp is high on the GOP’s Congressional agenda, repealing Obamacare is its first priority. That would also impact Medicare by undoing improvements to drug coverage, free health screening procedures, and measures that limited Medicare spending and cracked down on waste, fraud and excessive payments for services.
President-elect Trump has made no public statements about Medicare since his election. Vice President-elect Mike Pence did say in an interview with ABC News that Trump intends to “keep our promises in Social Security and Medicare.” However, defenders of the current Medicare system are nervous about Trump’s nomination of Georgia Congressman Tom Price as Secretary of Health and Human Services. Price, a medical doctor, is a long-time supporter of Paul Ryan’s plan.
While it’s early in the game, and Trump’s election has sent us into uncharted political territory, I think it’s highly unlikely that we’ll see a full Ryan-style makeover of Medicare.
The program is simply too popular with older Americans, a large and politically active segment of the population. Plus, Trump seems determined to keep his campaign promises, from building a border wall to cutting taxes to repealing Obamacare. He repeatedly vowed to maintain Medicare. Why get into an ugly fight just to break that promise?
This will be just one more fascinating storyline in the already remarkable story of the Trump presidency.