Essay on Medicare Solvency

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Medicare Solvency: The Medicare Trust Fund Leanne Terry HCM 500: The U.S. Healthcare System Colorado State University – Global Campus Dr. Michelle Rose September 13, 2015 Medicare Solvency: The Medicare Trust Fund Medicare is a government funded program within the United States that provides health insurance to individuals who are sixty five years and older, regardless of income or medical history, those that have end-stage renal disease, and/or individuals who are under sixty five years old and have disabilities for which they are entitled to Social Security benefits. The Center for Medicare and Medicaid Services (2015), which operates both Medicare and Medicaid, states that Medicare provides coverage for over 55 million…show more content…
The HI trust fund is primarily financed by payroll taxes of current employees and the SMI is funded by a combination of monthly premiums paid by current enrollees and general revenues. Shi & Singh (2015) state that incomes and expenditures are both accounted for in each trust fund and taxes, premiums, and other revenues are credited to the respective trust funds, and benefit payments and administrative costs are the only purpose for which disbursements from the funds can be made. When expenditures exceed revenues in the trust funds, assets start to deplete and, in turn, insolvency of Medicare is inevitable. Almost from its inception, the HI trust fund has faced a projected shortfall, though the insolvency has been postponed a number of times. The postponement has been in large part due to legislative changes, such as an increase in the payroll tax. Blahous & Reischauer (2015) concluded that in 2014, the HI trust fund had an income of $261.2 billion and a cost of $269.3 billion, leaving a net change of -$8.1 billion. During that same year, the SMI trust fund had an income of $338.0 billion and a cost of $344.0 billion, with a net change of -$6.0 billion. Some challenges to maintain Medicare solvency include; increased enrollment due to the aging population, cost increase as a result of increased beneficiaries, and the shrinking workforce. With the implementation of the Affordable Care Act (ACA) in 2010, one of the main focuses of the
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