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Life Health > Health Insurance > Medicare Planning

AAA Reviews Medicare Reform Options

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Experts at the American Academy of Actuaries have written a primer for policymakers who want to save the federal health insurance program for elderly and disabled Americans.

Although the possibility that Social Security might run out of money has been attracting a great deal of attention, Social Security has 6 times has many trust fund assets as Medicare program has, and the Medicare program faces a deficit that is twice as big as the Social Security deficit, members of the Medicare steering committee at the AAA, Washington, write in a report summarizing Medicare reform options.

“Medicare trust assets are projected to be drawn down beginning in 2011 and to be depleted in 2019,” the steering committee members write.

Reformers could improve Medicare trust fund solvency by taking steps such as increasing the Medicare payroll tax rate, making the Medicare payroll tax progressive, increasing general revenue funding, increasing beneficiary premiums and out-of-pocket costs, and investing trust fund assets in stocks, the steering committee members write.

Reformers also could reduce Medicare program spending, by taking steps such as creating “defined contribution” programs or increasing the eligibility age, the steering committee members write.

But the steering committee members note that cutting some benefits could increase other program costs and affect U.S. residents’ quality of life.

Delaying Medicare eligibility to age 70, for example, would save only about 8% of net Medicare costs, and “delaying Medicare eligibility to age 67 or older would likely result in some people being uninsured,” the steering committee members write.

One remedy to that side effect might be allowing Americans near the Medicare eligibility age to buy into the program, the steering committee members write.

A copy of the report is on the Web


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