Solving the Medicare Crisis

Introduction

Representative Howard Hughes has been asked to participate in a panel discussion on the Medicare funding crisis. My task as Chief of Staff is to prepare a written response for Rep. Hughes who was recently elected to fill out a term in Congress. The topic for the panel discussion is the Medicare funding crisis aimed at reducing expenditures by enrolling participants in Health Maintenance Organizations (HMOs). I will begin with the history of Medicare in order to bring us full circle with present day issues and concerns.

Problem Identification

Medicare was enacted July 30, 1965, by President Lyndon B, Johnson part of the Social Security Act Amendments, popularly known as the Medicare bill. It established Medicare, a health insurance program for the elderly, and Medicaid, a health insurance program for the poor (Chen, 2012).

Present day Medicare recipients extend beyond the elderly and poor to certain people younger than age 65, including those who have disabilities, permanent kidney failure also referred to as End Stage Renal Disease (ESRD) or amyotrophic lateral sclerosis (Lou Gehrig's disease). The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care (Medicare, 2012).

Funding for the Medicare program has been in constant change since its inception in 1965 as well as eligibility requirements, which has led to the issues we face today regarding the future financing of the program.

Situation Analysis

For taxpayers who have contributed to the Medicare program over the years may certainly think the program is in a crisis as they face an uncertain future of Medicare due to talk of the program becoming bankrupt in years to come. The contributions made by taxpayers could take years for them to see a return as financing the program has taken a blind eye to the federal government both Democrats and Republicans alike. Instead of looking for ways to finance those that are already participants, President Obama signed into law the Patient Protection Affordable Care Act (PPACA) of 2010, which will add approximately 32 million U.S. citizens seeking access to quality care along with 78 million baby boomers reaching age 65.

The Centers for Medicare and Medicaid Services (CMS) reported in 2009, the national health expenditures grew 4.0% to $2.5 trillion or $8,086 per person up from $7,290 in previous years, and accounted for 17.6% of the U.S. Gross Domestic Product (GDP) (Centers for Medicare & Medicaid Services 2009). The Gross Domestic Product is defined as, "the market value of final goods and services produced within the borders of a country over a period of one year" (Folland, Goodman, Stano p.547). Health care expenditures play major role in the U.S. economy and account for a large percentage of expenditures, allocations for health care expenditures and the gross domestic product are expected to increase 5.7 percent in 2009, and have a projected average 6.1 percent increase per year over the period of 2009 and 2019. At this point, radical measures are needed to reduce the cost of medical services and revamping how the program is financed would preserve the Medicare program, thus allowing for future beneficiaries to benefit from the Medicare program. Also, prevention of Medical fraud would help as well as fraud cost the U.S. billions each year.

The Medicare program is funded through two trust funds - the Hospital Insurance (HI) trust fund and Supplementary Medical Insurance (SMI) trust funds. Medicare Part A is covered under the HI fund. SMI covers Part B and Part D, and coverage