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Medicare Description

The Medicare program is parted into several divisions which arefinanced differently and thus the financial health of each of thecomponents involved is different from the other. It is the case withhospital insurance trust fund and the supplemental medical insurancethat consists of both part B and D. The parts are referred to as themedical insurance and the prescription drug cover programs. Thefinancial health is influenced by the policies that formed by thepolicymakers, and for several previous years, the laws had a negativeimpact on the program’s finances. The recent health reform lawwhich comprises of the Affordable Care Act has improved the outlookon the financial of the Medicare insurance trust fund (Cuckler etal., 2013). The policies on the payroll tax contributions made to theSocial Security funds are not flexible depending on the costs thatthe hospital insurance program has to spend on the beneficiaries. Onthe other hand, the supplemental medical insurance beneficiaries arerequired to enroll and pay monthly premiums which can be regulated tocover the costs as they are estimated in the future projections bythe Trustees.

Every year, Trustees of Medicare trust funds are required to reportto the lawmakers on their current financial health and their futureprojection on the financial sustainability. The report made in 2016finds that Medicare hospital insurance trust fund will be solventuntil the year 2028. The report finds that the Medicare programs areinadequately financed in the next decade. The hospital trust fund hashad its expenditures exceeding its income in the past ten years. Inthe calendar year of 2015, the trust fund had to supplement theincomes with a percent of their assets such that they are left withonly 194 billion dollars in the trust fund assets. In the recentyears, the hospital insurance trust fund has seen less growth butincreased spending (Moon, 2015). The policies in the health carereform law are expected to result in a net reduction in Medicarespending, an increase in savings and new enrollment in Medicare.

There is a need for changes in the policies governing the Medicaretrust funds in tackling the financial challenges that will face theprogram shortly. In the case where policies don’t change, thehospital trust fund is projected to be exhausted by 2028. Theexhaustion had been expected in 2030 but has been brought forward bytwo years since the implemented changes are targeting the short-termrange rather than the long-term financial adequacy. The incomes andother revenues will only cover 87 percent of the insurance costs in2038, which will then decline to 79 in 2040 and rise to 86 percent in2090. It is projected that the Medicare expenditures will continue togrow, increasing to 5.6 percent of gross domestic product by 2040. Toinsure against the dip expected, financial sustainability of thehospital insurance trust fund will be through raising revenues andslowing the increasing spending.

The supplementary medical insurance trust fund has been projected tohave more financial sustainability than the hospital insurance trustfund. The fund does not face insolvency and cannot be short of funds(Kaiser Family Foundation, 2009). The premiums which the enrolleeshave to pay monthly are set such that they adequately cover thequarter of the insurance costs while the three-quarter is covered bythe general revenues. With this being the case in the futureprojections, the trust fund will have sufficient financing withoutfacing financial challenges. The trust fund will continue to growshortly due to the increasing number of beneficiaries enrolling, theincrease in health care insurance cost per beneficiary as and due tolack of effect by the legislated price reductions (Neuhaus, 2016).

The government has allocated a significant percent of its federaland state budget to the Medicare program, and the trend will perhapscontinue in the near-decade with the increasing expenditures. Thegovernment, therefore, has a stake in the financial health of theprogram that tackles the health security of the elderly in thecountry. The policies that are approved by the lawmakers have toensure the financial health and sustainability of the program for thefuture old generations. The lawmakers are tasked with theresponsibility of creating policies that aid in its growth like thecase with the health care reform law. The provisions that areprovided in the law ensure that sustainability for the long haul.Such policies should be implemented with the long-term financialadequacy of the program in mind, with Medicare savings being higherthan the spending. Initiatives regarding increasing the income to theprograms should be undertaken to reduce the cost expenditures thatexceed income.

Medicare insurance programs have been dedicated to the seniors, andthey have been a benefit to their health and their economic securityduring the retirement years. The possibility of solvency will renderthe senior more economically burden with their decreasing health. Itis, therefore, a duty that the program, health experts, and thepolicy makers should deliberate over and the manner which is best tosustain the program for future generations.


Cuckler, G. A., Sisko, A. M., Keehan, S. P., Smith, S. D., Madison,A. J., Poisal, J. A., … &amp Stone, D. A. (2013). National healthexpenditure projections, 2012–22: slow growth until coverageexpands and economy improves. Health Affairs, 32(10),1820-1831.

Kaiser Family Foundation (2009). Medicare 101: the Basics. Availableat: http://data.biitbook.com/kuliah-online.pdf

Moon, M. (2015). Improving Medicare Financing: Are We Up to theChallenge?. Generations, 39(2), 164-171.

Neuhaus, S. (2016). Finance and economics: Are Medicare`s principlesstill relevant?. Australian Medicine, 28(8), 30.