by Edwin Quinabo
2024 could be among the last years before Medicare and Social Security experience a major overhaul. And the national election of 2024 could determine how much change these two programs will undergo.
If Democrats win a majority in Congress and the Presidency, Medicare features of the Inflation Reduction Act (IRA) that’s already law but not fully set in motion – drug price negotiations, cap on annual out-of-pocket drug costs at $2,000 – would be implemented uninterrupted with potentially other incremental changes.
Should Republicans win a majority in Congress and the Presidency, drastic changes to age eligibility for enrollees of Medicare and Social Security to the share of Medicare beneficiaries’ costs and how Medicare is funded could be changed as floated by GOP policy proposals. Considering that no Republican voted for the IRA, features of the IRA also could be on the chopping block.
Some Republicans have said they would not touch the two entitlement programs. But Republican-led studies looking into changes, proposals on record in the U.S. Senate and initiatives discussed on the debate stage by Republican presidential candidates, all suggest if the GOP is given a majority, deep changes are bound to happen. According to Vox, after meeting with pharma lobbyists, former president Donald Trump also promised to drop drug price negotiations.
Advocates of these national programs say without a doubt Medicare and Social Security are on the ballot in 2024.
Meanwhile, the current big changes for Medicare 2024
While the Medicare Part D out-of-pocket costs at $2,000 a year starts in 2025, beginning in 2024 the annual maximum limit or cap on out-of-pocket drug spending will be no more than $3,429 (in the 2024 catastrophic coverage phase) for most before reaching the RxMOOP, according to the Centers for Medicare and Medicaid Services (CMS).
Also, the $35 cap on a month’s supply of all formulary insulin products will continue in 2024, as well as approved vaccines for a $0 copay during all phases of Part D coverage.
The cap on insulin and out-of-pocket costs will translate to considerable savings for Medicare beneficiaries suffering from chronic illnesses, experts say. Both initiatives were made possible through the passage of the IRA which passed unilaterally by Democrats before the 2022 midterm elections when Democrats held a unified government (executive and legislative control).
Nominal changes in Medicare for 2024 from 2023
For most healthy beneficiaries of Medicare, changes in cost for 2024 will increase in Part A (hospital stays) and decrease in Part B (outpatient and preventable care services) by a few dollars in Original Medicare. Similar small changes in costs are expected in Medicare Advantage Plans and Medigaps (private insurance).
The lack of changes from 2023 to 2024 will be welcomed by those contented with Medicare and their retirement plans — government or private – that have their previous employer covering a large share or all of Medicare costs.
But for others wanting more in savings, they will be let down in 2024 and potentially in the near future, senior groups say, with the bulk of changes of Medicare via the IRA is closer geared for beneficiaries with chronic illnesses with little more in savings on premiums and copays for most.
On top of that, eight lawsuits have been filed by pharma companies challenging the Inflation Reduction Act (which authorized the price negotiation process). An unfavorable ruling against the government could upend price negotiations which is currently underway for 10 drugs but will not take effect until 2026.
President Joe Biden hasn’t brought up any new plans to Medicare outside of the features in the IRA to be implemented. He hasn’t mentioned adding medical services like coverage for dental, hearing or vision as proposed by progressive Democrats in 2020. Currently, those without Medicare Advantage or Medigaps either go without healthcare in these areas or must pay costly uninsured prices.
Cost of healthcare even with Medicare is about one-third of average senior’s annual income
The average Medicare cost per beneficiary in the US was $15,727 in 2022, which is an increase of 3.88% or $588 from 2021. This cost includes all the expenses incurred by Medicare beneficiaries, including premiums and out-of-pocket costs when health care is needed, according to the Kaiser Family Foundation (KFF). Some Americans’ employee retirement plans will cover a large share of this average annual cost of Medicare.
But for others, with the median annual income for an American aged 65 and older at $47,630 (a third of that deriving from Social Security), the cost for healthcare for seniors with Medicare annually at about $15,500 is too steep for many who do not have cushy retirement plans, senior advocacy groups say.
Majority of Americans have favorable opinion of Medicare and Social Security
Still, a vast majority of Americans – both Republicans and Democrats – support Medicare and Social Security which are among the most popular entitlement programs, according to YouGov. Each program is especially liked by older Americans, who are closer to the age of receiving benefits.
About nine in 10 Americans (89%) who personally receive Social Security benefits have a very or somewhat favorable opinion of the program. Nearly as many of the people who currently have Medicare benefits (84%) have a positive view of it.
The enrollment in Social Security is currently 66 million Americans and for Medicare 64 million. Despite both programs’ popularity, there are serious calls to bring about major overhauls for both.
What are some of the possible changes to Medicare and Social Security?
Raising the age eligibility for Medicare and Social Security
If you recall beginning this year in January, several massive protests erupted throughout France because of a pension reform bill that proposed to increase the retirement age there from 62 to 64 years. Protests drew over one million people nationwide in a series of often violent demonstrations in France’s largest cities to the countryside. All that controversy and brouhaha came about due to upping the retirement age by two years.
In the U.S. prominent Republicans have proposed raising the retirement age to be eligible for Medicare and Social Security to the age of 70 as a way to rein in government spending and to keep both programs from going bankrupt, they say.
Currently, the Medicare eligibility age is 65. For Social Security the current eligibility age begins at 62, but with benefits collected at 20% less than Full Retirement Age (FRA). To collect Social Security benefits at FRA, Americans must wait between mid-66 to 67 years old.
The eligibility age-hike plan was developed by a Republican Study Committee led by a group of conservatives in the U.S. House. Raising the retirement age has been supported by conservatives like presidential candidate Nikki Haley. Besides the insolvency threat to these programs, Haley says the retirement age should be raised because people are living longer.
Republicans also want to link retirement age to future changes in life expectancy, which could mean that the age for claiming Social Security could creep even higher than 70.
The last time Congress upped the retirement age was in 1983 to 67 years old for anyone born in 1960 or later.
According to a Quinnipiac poll from March 2023, nearly 80% of respondents opposed upping the retirement age even three years to 70 years old.
In an Associated Press and NORC Center for Public Affairs research poll, over 70% were against raising the eligibility age.
Impact of raising eligibility age
Senior groups say boosting the age to claim retirement benefits would likely increase financial hardship and poverty for older Americans, low-income seniors, seniors who need to stop working due to health issues or to take care of family members who are also older.
Mary Johnson, Social Security and Medicare policy analyst, at The Senior Citizens League, an advocacy group for older Americans, said “postponing eligibility for Medicare would leave most older Americans ages 65 -70 significantly underinsured and threatens their finances and their health. The cost for those 65 to 70 would be even more financially challenging, especially given the fact of the need to use more care and spend more out of pocket. Where will they find the money to pay those new unexpected healthcare costs?”
She said Americans between 65 to 70 years of age would either need to work longer in order to keep their health coverage through their employers, or turn to Healthcare.gov’s marketplace to buy insurance. She noted that even plans for people who are under 64 can be costly, running more than $10,000 per year in premiums.
Nancy Altman, the president of Social Security Works, an advocacy group for the benefit program, said “It particularly hurts those in low-income, physically demanding jobs who are more likely to stop working earlier due to health issues.”
Altman said “most people don’t even work to their full retirement age, much less 70. This would add to insecurity, and it would add to the retirement income crisis.”
Experts say people who hold laborious type work would also be impacted most because they’re just physically unable to work until 70 years doing hard labor.
Certain communities like Hawaii’s Filipino community are disproportionately represented in blue collar and trade-skilled work that require exhaustive physical labor.
Florante Guzman, 57, Pearl City, said “I cannot believe that politicians are even thinking about raising the retirement age to 70. It’s just crazy. My dad died at 60. He worked all his life and couldn’t enjoy retirement and collected nothing for all those years he contributed to Medicare and Social Security. I am close to my dad’s age. I’ve been a cook since my twenties. It’s hard work, standing for hours, having to move fast in a very hot kitchen. You sweat for hours. Now, at my age, I can feel the body pain just to get up to go to work. My knees are no longer good after all these years. I pray that I can continue working until I reach retirement age and feel like I’m almost there.
“If they raise the retirement age for me, people like me, maybe we have no choice but to go to the Philippines, because our bodies cannot last until 70 years old working the same way. If they raise it for the younger people. That’s unfair. If I were them, maybe moving to another country would be better,” said Guzman.
Teresita Bernales, retired, Kailua, says the current age eligibility of retirement benefits is alright as it is at 65. She is enrolled in Medicare Advantage plan that is paid for by her NYS Retirement system. Instead, what she would like to see is Medicare adjusting with the health needs of the aging population which she says Medicare didn’t anticipate in its inception.
Expanded services, emphasis on healthy lifestyle
Bernales said, “There’s greater emphasis now on prevention rather than treatment of a disease. With this model, Medicare should increase services to prevent diseases like diabetes, heart attack, stroke, etc.
“Emphasis on healthy lifestyle should be started early in life. Food expenditure related to promoting good health can be made deductible. Highly processed foods should be eliminated and replaced by healthy ones.
“Definitely an adjustment on Medicare cost is needed depending on a determined baseline every 5 years. As a result of a healthy lifestyle, major illnesses will decrease. When the trend continues, Medicare can be adjusted to reflect less need for major health interventions,” said Bernales.
She said she supports dental, hearing and vision coverage.
On home health services, Bernales would like to see them expanded to include less restrictions and wider eligibility for services available for those aging in place because she said seniors are living longer and now opting to age in place.
Rose Cruz Churma, retired, said the State’s EUTF covers all costs charged by Medicare for life. Her husband retired from the State of Hawaii and his retirement benefits cover her, as well. “So, we don’t pay anything for premiums. We’ve signed up with Kaiser, and the coverage is pretty generous with deep discounts (or covered at 100%) for prescriptions, medical tests, vaccinations, and the like.”
Churma said she is in favor of keeping Medicare age eligibility age 65. “However, we should explore universal health care for all, not just seniors. It may not happen in my lifetime, but it is worth analyzing its impact now.”
Like Bernales, Churma sees that healthcare providers are emphasizing healthy, preventative medicine. “We’ve been with Kaiser the last 40 years. Kaiser is proactive in keeping seniors healthy—that’s the impression I get. I am reminded periodically to get mammograms, colonoscopy, etc. all covered at 100% by whatever policy we have,” she said.
While healthcare providers are emphasizing healthy living and a prevention approach as both Bernales and Churma say, a policy that raises the retirement age could counter that model.
Altman said, “more people would be entering the program not only at an older age but potentially sicker after delaying health care treatments for several years.” In the long run, she says, “delaying Medicare access could even counter the very purpose it aims for in cost-savings because sicker seniors would require more health services.”
Changes in funding Medicare and Social Security
Because reducing benefits to the two entitlement programs or increasing premiums for people enrolled in Medicare are overwhelmingly unpopular and could be a political detriment, some senior advocates see the two proposals that would change the way Medicare and Social Security are funded as a backdoor approach to making unpopular changes.
Instead of openly coming out with a plan to reduce benefits or raise premiums and pitch them to the American people, for example, the stealth approach is to emphasize the monolithic budgeting process, then make last minute budgetary cuts.
Sen. Ron Johnson, Republican, Wisconsin, has proposed subjecting Social Security and Medicare to annual congressional spending bills.
Sen. Rick Scott, Republican, Florida, has proposed subjecting nearly all federal spending programs to a renewal vote every five years.
Funding for both entitlement programs is basically on autopilot as they are now.
Experts say both senators’ plans would make Medicare and Social Security more vulnerable to budget cuts. They would leave the programs susceptible to Washington’s notorious fraught debates over funding the government, making it more difficult for retirees to count on a steady stream of benefits.
Changes to Medicare found in the IRA (since the IRA is law) are already in place or underway, some of which experts say are dramatic and could save beneficiaries substantial cost-savings, particularly for those with chronic illnesses.
Possible changes pitched by some Republicans could become law if the party wins a unified government. Losing the House, U.S. Senate or presidency would cancel any hopes for such dramatic changes, politicos say.
President Joe Biden said, “From the time you’re 16, you have money taken out to pay for Social Security. But guess what? There’s somebody out there busting their neck, or you just lost your husband or your wife, you’re 66, 68 years old, and they want to take away your Medicare and your Social Security.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget in Washington, said “Changes desperately need to be made to the programs to ensure solvency — politicians can disagree about what changes to make, but not whether they need to be made. It’s highly disappointing to hear the president, who knows better, resort to fearmongering rather than using his platform to help enact needed changes.”
Democrats side with looking at other means besides cutting services, raising premiums or raising the retirement age to maintain the two programs. For example, the Congressional Budget Office estimates that Medicare will save $98.5 billion over 10 years from the price negotiations. Other areas are being explored.
The future of both programs, what they’d transform to in the next 5-10 years, will be determined by next year’s crucial national elections, politicos say.
by Edwin Quinabo