ObamaCare (ACA) WILL Increase Medicare Spending ; Insuracne Value Rising

Reforming Medicare is not likely any time soon as the will to make changes that will effect the voter base is unacceptable. That the number of individual that depend on Social Security, Medicare and Medicaid is growing by the day points to huge problems in the near future.

That the 'insurance value' has to be raised to keep Medicare solvent as more and more people join because of ACA, only points that spending levels that will never decrease, only increase.

Then to make things worse, the savings rate for near retirees is virtually nonexistent. Fully more then 50% of those approaching retirement have less the $30,000 saved. The savings rate for the middle aged income group isn't much better in that they have saved enough right now, if they retired, to last them just a couple of years.

And with the collapsing of the entire government it bode well for individuals that think they can rely on government problem to pay the difference between what have saved and what they think they have to have to sustain the life style. A life style, in a lot of cases, that brought them to beggar status in the first place. Go Figure.

Reducing Medicare Spending
Source: Liqun Liu et al., "Framing Medicare Reform," National Center for Policy Analysis, March 2014.

March 18, 2014

Provisions in the Affordable Care Act (ACA) are supposed to constrain Medicare spending, but there is doubt that those spending reductions will actually occur, say former Medicare Trustee, Thomas R. Saving, and Andrew J. Rettenmaier, both senior fellows at the National Center for Policy Analysis, and their colleagues Liqun Liu and Zijun Wang of the Private Enterprise Research Center.

Medicare Trustees Reports show Medicare spending as being one-third lower than the Medicare spending forecast prior to the passage of the ACA, with unfunded liability obligations declining. However, these estimates are assuming that the spending controls within the ACA (such as lower reimbursement rates to doctors) will actually be realized. The authors looked at two forecasts: the "current law" forecast in the 2013 Trustees Report and the alternative forecast (which assumes that spending constraints are not fully realized).

• Medicare and Social Security both replace workers' average annual compensation before retirement. Under the alternative scenario, Medicare's insurance value will grow as a percent of retirees' preretirement average compensation.
• Today, Medicare's annual insurance value is worth 23 percent of average annual compensation of medium earning workers who turn 65 years old this year. By 2030, that number will be at 29 percent, and by 2065, it will be at 37 percent.
• This rising insurance value leads to increased replacement rates (meaning the replacement of preretirement compensation) for future retirees. What this means is that savings incentives decrease along with investment, which hurts economic growth.
• Using current law baseline forecasts, however, the analysis produces a much more stable replacement rate.

Lowering spending on Medicare is necessary, but it is unlikely that the United States will actually see lower spending growth from the ACA. Are there more practical ways to lower spending? The authors look at two possible reforms: raising the eligibility age for Medicare (the MEA) and means-testing the government's contribution to Medicare.

• Raising the MEA is not enough to bring Medicare spending down to the baseline forecasts. Currently, the baseline forecast spending is 50 percent less than the alternative forecast. Increasing the MEA would reduce Medicare spending to 91 percent of the alternative forecast, to a level that is 37 percent higher than the baseline.
• However, means-testing starting in 2023, in addition to raising the MEA, could result in the same spending levels as the baseline forecast. Retirees with higher lifetime incomes would have to pay higher premiums to participate in Medicare.

By constraining Medicare spending, the United States will see higher national savings as well as decreased welfare loss of taxation, because there would be less reliance on higher taxes to finance the program.