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The Medicare program

The Medicare program

The Medicare program has undergone considerable change since it was established in 1965 and has grown to become the primary source of health insurance coverage for the old and permanently disabled Americans who qualify for the coverage. The many changes that Medicare has gone through are so that it can match the increases in medical costs, the changing methods of medical delivery, and the fast development of new technology in medicine. Since this is a federal scheme that impacts millions of the estimated financial stability of the plan, it will also discuss several initiatives that the government of the United States might implement to preserve the functions of the Medicare program.

Medicare’s Financial Health and Future Projection on the Financial Feasibility

The financial health of Medicare is constituted of two different trust funds, the first one being the Hospital Insurance Trust Fund (HI) for Part A, and the second one is the Supplementary Medical Insurance Trust Fund (SMI) for Part B and Part D (Musgrave, 2012). For the people who are registered under Medicare Part C, their premiums are made on behalf of the recipient in fractions that are convenient from the trust funds of Hospital Insurance and Supplementary Medical Insurance (Musgrave, 2012). A Board of Trustees oversee and manage these trust funds and report on the financial state of Medicare to Congress every year. In the year 2016, the report given to Congress by the trustees established that the HI trust fund would stay financially sound and that the program had the capacity to pay 100% of the Medicare insurance that is granted until 2028 (Cosgrove, 2016).

The account also identified that even though the HI trust fund has been estimated to stretch to its maximum in 2028, 87% of Medicare Part A costs will be paid by other incoming revenue together with payroll taxes. In regards to the SMI that covers Medicare Part B and D, it showed that it will remain being financed sufficiently and is not facing bankruptcy in the future. The financing for the SMI trust fund is provided by the current laws through general revenues and recipient fees every year to accommodate the contemplated costs of the following year. The reason for this is that the premiums of recipients and the general tax inputs are tailored to the stages that make certain 100% coverage by SMI.

In the past eight years, the HI income has been exceeded by Medicare Part A, making the trust fund of HI make up for the deficit by drawing down. The Medicare Trustee report for 2016 projected a possible small surplus for the coming four years, after which it will return to a deficit until 2028, when it goes into receivership, meaning that its funds will be insufficient to adequately Part A of the Medicare fund. Some resources will still be accessible to finance close to 87% of the program, as stated earlier, but the trustees have projected that under such settings, the coverage of Part A would swiftly be cut short. Apart from the estimated insolvency of the HI trust fund, it has also been projected that there will be a growth in the spending of Medicare.

Even though the Medicare Trustees noted in their reports a decrease in the increase of health care expenses in the United States, the growth is still greater than the total domestic products of the country. Moreover, it is estimated that the cost of Medicare will grow at a faster rate than the GDP as a result of an increase in service utilization. It is expected that with the aging of the baby boom population, there will be a significant rise in the overall expenditures by Medicare. The Trustees have envisaged that in ten years, Medicare will experience an upsurge of $1.3 trillion by 2025 from $648 billion in 2015. It has also been estimated that of the $1.3 trillion, $570 billion will be utilized for services of Part A (Smetters, 2013).

Possible Initiatives that Might Preserve Medicare

It is evident that the spending on Medicare continues to be a growing issue of concern in regards to its survival financially. One possible initiative that might preserve Medicare is the continuous improvement of the parts of the Affordable Care Act that have significant money-saving results. For this to be successful, it will involve the constant reassessment of provider payment changes, payment reform plans, financing methods, quality delivery system for improvement mandates, and beneficiary benefits & premium changes. The second initiative would be the establishment of a new payment plan that will particularly focus on the health effects and advancements of heavy system utilizers. Research in 2005 showed that 63% of the Medicare costs were utilized by only 10% of the beneficiaries; this is why establishing and endorsing new health advancement goals for this group of beneficiaries will have a significant positive impact on saving money (Maddox, 2011).

The final initiative would be to raise the age of enrollment to seventy or seventy-two, but this might raise controversies. The life expectancy increased by eight years between 1965 and 2011, meaning that apart from the growth of eligible beneficiaries in the population of the aging baby boom that is estimated to increase the expenses of Medicare, they will also live longer. With this in mind, the action should have provisions that patriarch the current recipients and open up doors for those above the age of fifty to start receiving Medicare at age sixty-five. This will also mean that individuals at the age of forty-nine as well as those younger than that age will begin getting Medicare benefits at seventy years and older.


Medicare is experiencing a very predictable and extended season of rapidly increasing spending due to the retirement of the baby boomers, the growth in endurance, and the continued increase in healthcare expenses per beneficiary. There is much need for changes that will enhance and improve the long-term solvency and sustainability of Medicare.


Cohen, I. G. (2017). The Oxford Handbook of U.S. Health Law. Oxford University Press.

Cosgrove, J. (2016). Reducing the Deficit: Spending and Revenue Options. DIANE Publishing.

Kinney, E. D. (2016). The Affordable Care Act and Medicare in Comparative Context. Cambridge University Press.

Maddox, G. L. (2011). The encyclopedia of aging: a comprehensive resource in gerontology and geriatrics, Volume 2. Springer Pub.

Musgrave, G. (2012). Patient Power: Solving America’s Health Care Crisis. Cato Institute.

Smetters, K. A. (2012). Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities. American Enterprise Institute.


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The Affordability and Financial Sustainability of Medicare

After researching the affordability and financial sustainability of the Medicare program, discuss whether or not the Medicare program is reasonably affordable for its beneficiaries – why or why not?

The Medicare program

The Medicare program

Is the program financially sustainable for future generations, given the retirement of the baby boomers and the shrinking of the active taxpaying workforce numbers? What changes could be proposed now/soon to save Medicare? Provide responses based on facts to each of these items (with credible/peer-reviewed citations) in a 200-word supported analysis. Remember to use in-text citations in your post.

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