Politics

Are Big Changes Coming for Medicare, Social Security?

Republicans will risk political pushback to put entitlement programs on the agenda during the presidential election.

Some changes are in the wind for Social Security, Medicare and Medicaid—entitlement programs that account for 45% of the federal government’s payouts.

Many of the changes are still years away. But some of them will start next year, smack in the middle of the presidential election campaign, forcing candidates to address issues that they and their advisers generally try to steer clear of when they’re running.

Kicking off the rare election-year debate: a move to rescue the Social Security disability fund before 20% cuts in monthly payments need to be made (recipients are people unable to work because of illness or injury). Congress will find a solution before money runs short in fall 2016. Tighter eligibility standards are likely to be added as a condition of more money being pumped into the fund.

A less visible change with a broader effect will come with Medicare’s emphasis on value over volume. By the end of 2016, 30% of Medicare payments to providers will be value based. By 2019, that figure will jump to 50%.

Examples of value pricing: A single price for all care that is tied to one medical event, such as heart bypass surgery. And reduced payments to hospitals that have high rates of readmission or infection.

The shift bears watching, since Medicare is the largest health insurance provider in the United States and other insurers are generally quick to follow its lead.

Short-term changes are also in store for Medicaid, the government’s program that provides health care to people with low incomes. More states will join the 29 (along with the District of Columbia) that already have agreed to expand eligibility in return for federal subsidies to help pay the bills for a few years.

Republicans will use the debates over parts of the programs to press for longer-term fixes and cost cuts, even if those actions expose them to a potential pushback from Democrats and senior citizens. For example, former Florida Gov. Jeb Bush, who announced his candidacy for president on Monday, advocates raising the Social Security retirement age.

Kentucky Sen. Rand Paul and Ohio Gov. John Kasich want to allow individuals to invest some of their Social Security withholdings in private accounts, an idea that George W. Bush proposed during the campaign for president in 2000. The idea stalled after he took office, and lost momentum when the stock market fell during the last recession.

Raising the cap on payroll taxes and means testing are also on the table for Social Security. For Medicare, too, a higher eligibility age and means testing will be proposed.

Democratic resistance will derail most of the longer-term reform efforts, for now. In time, though, some of the changes will have to be put into place to avoid major cuts in benefits.

Medicare Part A, which covers hospital stays, will reach insolvency around 2030, if no alterations are made. Pushing it to the brink: A swelling of the ranks of beneficiaries to 82 million, from 55 million now, and a corresponding increase in obesity and chronic diseases.

Social Security is in a bit better shape. It can avoid benefit cuts until 2037. After that, though, without some sort of infusion of cash or higher eligibility standards, monthly checks would be trimmed by 25%.

But none of those fixes are likely until the deadlines loom. That’s how Congress works.

Senior Associate Editor Richard Sammon contributed to this report.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
October 13, 2021
Gen X: How to Make Sure Your Future Self Remains Funded
personal finance

Gen X: How to Make Sure Your Future Self Remains Funded

If you’re a Gen Xer, like me, now might be the right time to talk to a financial professional to learn more about how to adjust your retirement planni…
October 20, 2021

Recommended

Even If You Already Have Medicare, Don’t You Dare Skip Open Enrollment
Medicare

Even If You Already Have Medicare, Don’t You Dare Skip Open Enrollment

It’s the perfect time to think about what’s changed in your life and with your health care plan. After looking at these four issues, you might find th…
October 22, 2021
How Congress Could Expand Medicare Benefits to Cover Dental, Hearing and Vision
Medicare

How Congress Could Expand Medicare Benefits to Cover Dental, Hearing and Vision

Democrats have included the proposal for the new benefits in their budget reconciliation bill. They also want to allow Medicare to negotiate lower dru…
October 21, 2021
Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
October 20, 2021
11 Costly Medicare Mistakes You Should Avoid Making
Medicare

11 Costly Medicare Mistakes You Should Avoid Making

If you don't make the right choices, you could end up with high Medicare premiums and big out-of-pocket costs.
October 20, 2021