You Are Actually Right To Feel Fear
According to a detailed report by the Employee Benefit Research Institute , many of us are in fact very likely to run out of money no matter your income level. Their Retirement Security Projection Model predicts that overall 40.6% of all U.S. households where the head of household is between 35 and 64, are projected to run short of money in retirement.
And, while the data varies dramatically with peoples pre retirement income levels, not even those in the highest income quartile are immune from running out:
- 83 percent of baby boomers in the lowest income quartile will run out of money in retirement
- 47 percent of boomers in the second lowest quartile will run out
- 28 percent of boomers in the second highest quartile will run out
- 13 percent of boomers in the highest income quartile will run out
The above data refers to people who will be retired for 35 years. The data is only slightly better if you are living in retirement for 20 years but even then a full 81 percent of the lowest income quartile and 8 percent in the highest income quartile will run out of money.
Almost one out of ten of the very richest among us will run out of money in retirement? Yes!
Yikes! Yikes! YIKES!
Medicare Will Run Out Of Money In 2026 Three Years Earlier Than Expected Government Report Says
Medicare will run out of money sooner than expected, and Social Security’s financial problems can’t be ignored either, the government said Tuesday in a sobering checkup on programs vital to the middle class.
The report from program trustees says Medicare will become insolvent in 2026 three years earlier than previously forecast. Its giant trust fund for inpatient care won’t be able to fully cover projected medical bills starting at that point.
The report says Social Security will become insolvent in 2034 no change from the projection last year.
The warning serves as a reminder of major issues left to languish while Washington plunges deeper into partisan strife. Because of the deterioration in Medicare’s finances, officials said the Trump administration will be required by law to send Congress a plan next year to address the problems, after the president’s budget is submitted.
Treasury Secretary Steven Mnuchin said in a statement that there’s time to fix the problems. “The programs remain secure,” Mnuchin said. Medicare “is on track to meet its obligations to beneficiaries well into the next decade.”
“However, certain long-term issues persist,” the statement added. “Lack-luster economic growth in previous years, coupled with an aging population, has contributed to the projected shortages for both Social Security and Medicare.”
But demands on both programs are increasing as America ages.
Most Of Those Who Watch Medicare Finances Agree That The Larger Problem Right Now Is How Much Money Is Being Collected For The Trust Fund
Its far less clear what is happening on the spending side of Medicare Part A.
While COVID-related hospital expenses for those on Medicare are expected to be substantial, Medicare hasnt been reimbursing as much care of other sorts. In some cases, thats because hospitals in COVID hot spots temporarily stopped doing elective procedures like joint replacements. In other cases, patients with non-COVID ailments have been afraid to go to hospitals for fear of catching the virus.
Also, said Goldwein, health care use tends to fall in recessions, even for Medicare, whose beneficiaries are largely retired.
In the end, he said, we basically threw our hands up and said we dont have the information to estimate how health costs will affect the Trust Funds financing.
There is one other COVID-related policy that could hasten the depletion of the Trust Fund. At least $60 billion of the funding provided as part of the CARES Act to help hospitals weather the pandemic came not from the general treasury, but from the Trust Fund itself.
That money in accelerated and advance payments is supposed to be paid back, via a reduction in future payments. But there is a push in some quarters for that funding to be forgiven, which would make the Trust Funds hole even bigger.
Meanwhile, one would expect the hospital industry to be ringing the alarm bells as potential insolvency approaches. But thats not happening.
Read Also: Is Tresiba Covered By Medicare
How Is Medicare Funded
The Centers for Medicare & Medicaid Services is the federal agency that runs the Medicare Program. CMS is a branch of the
. CMS also monitors
programs offered by each state.
In 2017, Medicare covered over 58 million people. Total expenditures in 2017 were $705.9 billion. This money comes from the Medicare Trust Funds.
Medicares Hospital Insurance Trust Fund Could Be Out Of Reserves By 2026
Medicares situation may be even worse.
The Trustees reported that Medicares reserves may run out by 2026. Thats because Medicare was also in poor shape before the pandemic hit, and the short-term costs of the crisis, estimated to be as much as $115.4 billion, could be the straw that breaks the camels back.
The same problems exist for Medicare as Social Security: fewer people paying in and more people getting benefits. However, there is also the fact that medical costs have risen dramatically and Medicare payouts are sizable.
Medicares Hospital Insurance Trust Fund can pay scheduled in-patient hospital expenses until 2026.
Read Also: Does Walmart Take Medicare For Glasses
Medicare Is Running Out Of Money Thanks To Covid
The pandemic is accelerating a problem that used to be front and center in health circles: the impending insolvency of Medicare.
Kaiser Health News
Everyone involved even tangentially in health care today is completely consumed by the coronavirus pandemic, as they should be. But the pandemic is accelerating a problem that used to be front and center in health circles: the impending insolvency of Medicare.
With record numbers of Americans out of work, fewer payroll taxes are rolling in to fund Medicare spending, the numbers of beneficiaries are rising, and Congress dipped into Medicares reserves to help fund the COVID-19 relief efforts this spring.
I think we have a real, impending health care crisis, said Dr. David Shulkin, who was undersecretary for health at the Department of Veterans Affairs under President Barack Obama for two years and led the VA for a year under Donald Trump.
In April, Medicares trustees reported that the Part A Trust Fund, which pays for hospital and other inpatient care, would start to run out of money in 2026. That is the same as the projection in 2019. But the trustees cautioned at the time that their projections did not include the impact of COVID-19 on the trust fund.
Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust the estimates accurately at this time, said the report.
The Federal Health Care Program Is On Track For A Trust Fund Shortfall In Just Five Years But Instead Of Paying For The Program That Exists Democrats Want To Expand It
To understand the implications of Democrats’ current plans for expanding federal health care programs, it’s useful to start with some context from the biggest federal health care program that currently exists: Medicare.
Last week, Medicare’s board of trustees produced their annual report on the program’s fiscal health. That report contained some expected yet nonetheless alarming news: Medicare’s hospital insurance trust fund, itself a kind of accounting fiction, will be insolvent in just five years. Starting in 2026, the HI fund, which covers inpatient hospital services, will be depleted.
The program will have to rely on the HI fund’s incoming revenues, essentially operating on a cash flow basisand there won’t be enough cash. In 2026, the HI fund will only cover about 91 percent of its bills. In the years that follow, that gap will only grow larger. So without changes to the program’s financing, doctors, hospitals, and other medical providers will face rapidly reduced payments from the program, with ensuing ripple effects on both the wider economy, roughly a sixth of which revolves around health care services, and on the provision and availability of health care.
And then there is Medicaidand the possible creation of an entirely new federal health program.
It is possible that none of this will come to pass. Even if the entire package does become law, it will probably change in a variety of ways before it does.
Recommended Reading: Does Medicare Cover Dexa Scan
Medicare Parts B C And D
Medicare Part A is funded by the Medicare HI trust fund but because Medicare Advantage plans also cover Part A benefits, they receive partial funding from the Medicare HI trust fund too. Medicare Parts B and D have other sources of funding, the main one being what you pay in monthly premiums.
Medicare payroll taxes account for the majority of dollars that finance the Medicare HI trust fund. Employees are taxed 2.9% on their earnings1.45% paid by themselves and 1.45% paid by their employers. People who are self-employed pay the full 2.9% tax.
The Additional Medicare Tax for high-income workers puts an extra 0.9% tax on earned or invested income beyond $200,000 if you are single, or $250,000 if you are married.
Monthly premiums account for a smaller proportion of Medicare HI trust fund financing. The majority of Americans do not pay a monthly premium for Part A, though they will pay deductibles, coinsurance, and copayments for services rendered.
Premiums are free for people who have contributed 40 quarters or more in Medicare payroll taxes over their lifetime. They have already paid their fair share into the system, and their hard work even earns premium-free coverage for their spouse.
People who have worked less that 40 quarters, on the other hand, will be charged a monthly premium, and those dollars add up quickly.
Altogether, the Biden administration report suggests these dollars may not be adequate to meet the demands of the growing Medicare population by 2026.
After A Medicare Warning Whats Next
When Medicare issues the kind of warning it did, there is a defined process to follow. First, the President is required to submit to Congress proposed legislation that responds to the Medicare warning. Such proposed legislation needs to be made within 15 days of his Budget submission for the upcoming year, typically in February. Congress is then required to consider the legislation on an expedited basis.
The report specifies: Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.
Read Also: Does Medicare Pay For Tdap Vaccine
Frequently Asked Questions: Paying For Nursing Home Care When Money Runs Out
Paying for a nursing home when the money runs out can be a daunting and overwhelming situation. Hopefully, the billing office of the nursing home gives you adequate time to prepare to apply for Medicaid. Pre-estate planning is the best approach to knowing when money will run out and preparing well in advance for that scenario.
Medicares Important Hospital Fund Gets A Warning
Medicare is near and dear to most people. A survey by AARP found that nearly every adult believes Medicare is important to peoples health in retirement. But not everyone is confident that Medicare will be there for them throughout retirement. Just over half were somewhat or very confident Medicare will be around in the very long term. And no wonder. For the past decade, Medicare has issued annual warnings that the Hospital fund was in immediate danger of being depleted. Medicares 2007 report estimated the Hospital fund would be exhausted by 2019. Luckily, financial patches were made, and quality of hospital care was improved, but the fund is still not stable long-term.
The 2020 Medicare Trustees report projects the Part A Hospital fund will run out of funds in just six years. Part A is important because it covers inpatient hospitalizations, skilled nursing care for rehabilitation, hospice, and some home health care. It also provided about $119 billion in funds for the Medicare Advantage health plans last year.
What happens next?
You May Like: How To File A Medicare Claim Electronically
Medicares Hospital Trust Fund Will Run Out Of Money In 2029
This story has been updated.
The trust fund that pays Medicare’s hospital expenses will run out of money in 2029, a year later than the most recent projection, according to a federal report. The Social Security program will remain solvent until 2034, a projection unchanged from last year.
The annual report from the Social Security and Medicare board of trustees provides a snapshot of the long-term solvency of the federal government’s two biggest entitlement programs. It comes as Republican lawmakers have introduced a new version of a health care bill that would make deep, long-term cuts to a different entitlement program, Medicaid.
Together, Medicare and Social Security comprised 42 percent of federal program spending in 2016. Medicare covered 56.8 million beneficiaries in 2016 and Social Security provided benefits for 60.9 million people.
The trustees include representatives of the Treasury Department, Health and Human Services, Labor and Social Security. They noted that the growth in national health spending in the U.S. has slowed in recent years.
But they said it was unclear how much of that reflected the temporary effects of the economic downturn, as opposed to systemic changes in how health care is being used and paid for that could result in savings in years to come.
“We haven’t calculated that yet,” Treasury Secretary Steven Mnuchin added. “But I hope that’s in next year’s report.”
Stay On Top Of Health Care Issues
According to the Kaiser Health Tracking Poll published in February of 2020, healthcare was one of the top two issues that people say are the most important in the 2020 Presidential election. Health care was the top priority, cited by 26%. The economy came in a close second, mentioned by 23% of people. Democrats and Independents listed health care on top. Republican voters favored the economy . For Republicans, healthcare was their 4th top issue , behind immigration and foreign policy/national security . With the Medicare fund warning, its important to ask our elected leaders to use their knowledge, compassion, and courage to fix the problem. One of the challenges in the past, is that any funds taken out of Medicare, often are tacked on to the prices that private health insurance plans must pay. And that can drive hikes in what everyone pays for in monthly premiums, even those too young to be on Medicare. Everyone has a stake in this fight.
We welcome your comments about healthcare costs and the value of Medicare.
To compare costs and prices among hospitals and other healthcare providers, see Healthcare Costs at Consumer Health Ratings
To learn more about what Medicare pays for care, see Medicare at Consumer Health Ratings
For More on Coronavirus, click here
Read Also: Is Estring Covered By Medicare
How The Medicare Trust Fund Works
The Medicare HI trust fund supports Medicare Part A. This part of Medicare pays for inpatient hospital care as well as hospice. For people who are discharged from the hospital, it also covers short-term stays in skilled nursing facilities or, as an alternative for people who choose not to go to a facility, it covers home healthcare services.
Hospital Insurance Trust Fund
How is it funded?
- Payroll taxes paid by most employees, employers, and people who are self-employed
- Other sources, like these:
- Income taxes paid on Social Security benefits
- Interest earned on the trust fund investments
- Medicare Part A premiums from people who aren’t eligible for premium-free Part A
What does it pay for?
- Medicare Part A benefits , like inpatient hospital care,skilled nursing facility care,home health care, andhospicecare
- Medicare Program administration, like costs for paying benefits, collecting Medicare taxes, and fighting fraud and abuse
Also Check: What Is Original Medicare Mean
How To Protect Your Own Retirement
No matter what happens with Social Security and Medicare, you need a strong and well-documented retirement plan one that you can maintain and update as your own finances evolve. Given the perilous economic situation, this is more true now than ever before.
Create a Detailed Plan: The NewRetirement Retirement Planner is an extremely detailed tool that can help you set goals for retirement, find possibilities for achieving those goals and keep track of your progress. Get started today.
Maximize Your Social Security Benefits: Try different start ages and benefit amounts and review your cash flow and out of money ages.
Plan for Medical Expenses: Medicare does not cover nearly all of your medical expenses. The NewRetirement Planner helps you estimate your lifetime out of pocket costs so you can have a more reliable and secure plan.
Run Worst Case Scenarios: We think Social Security and Medicare will stay viable. However, if you are at all doubtful, run a retirement projection with reduced benefits or delayed benefits. Make sure your plan is still viable.
Performance Of Federal Government Over The Years For Medicaid
The Federal Government, after the launch and success of the Medicaid program, continued to support it financially and morally, making it the finest healthcare program in Americas history.
But with life expectancy rising and more and more people coming under the umbrella of low income individuals stat due to recessions and other financial meltdowns, the programs load has increased significantly over the years.
The pressure to reduce the Medicaid programs federal costs has provided them with a proposal to restrict Medicaid funding or change the program into a block grant or per capita cap.
This per-capita block grant system would introduce a dedicated sum of money for the Medicaid program per enrollee, and the ratio would change depending on the enrollee category. Such as blind, aged, and disabled enrollee would get more money than healthy adults.
So far, this is the progressive continuation of the Medicaid program to spend money based on the categorical reach of the enrollees and who deserves it the most depending on their healthcare and monetary situation.
You May Like: Does Medicare A Have A Deductible