456 CHAPTER 14|ECONOMIC AND SOCIAL POLICY
MEDICARE COVERAGE
NUTS & bolts
Medicare Premiums for 2010
Part A (hospital insurance): Most people do not pay Part A premiums because they or a spouse has
40 or more quarters of Medicare-covered employment.
Part B (medical insurance): $110.50 per month.
Part D (prescription drugs): $32.34 per month.Medicare Deductible and Co-Insurance Amounts for 2010
Part A: Medicare pays all covered costs except a deductible of $1,156 during the fi rst 60 days and
co-insurance amounts of $289 per day for days 61 through 90 of a hospital stay and $578 per day for
up to 60 “lifetime reserve days” that can be used at any time during one’s lifetime. No costs beyond
150 days are covered.
Part B: $140 per year and then a 20 percent co-pay after meeting the $140 deductible.
Part D: $320 per year and then a 25 percent co-pay for the fi rst $2,840 of drugs. The benefi ciary then
pays 50 percent of the next $2,840 of drug costs. After a $4,550 out-of-pocket annual limit is reached,
Medicare pays 95 percent of the costs of drugs.Note: Part C, known as Medicare Advantage, is not included here because it is not used nearly as widely as Part A
or Part B and its provisions get quite complicated.
Source: Health and Human Services, “Strengthening Health and Opportunity for All Americans: Fiscal Year 2013
Budget in Brief,” pp. 56–57, available at http://www.hhs.gov/budget/budget-brief-fy2013.pdf (accessed 9/24/12).14.4
program’s commitments, are $8.6 trillion, while Medicare has unfunded liabili-
ties of $20 trillion (plus another $2.7 trillion to pay for trust fund redemptions).^46
Even though such projections depend on assumptions about future economic per-
formance, demographic trends, and other uncertain variables, the relative diff er-
ence between the two programs is signifi cant. Medicare’s troubles are more than
two and a half times as serious as those of Social Security!
Another study estimates that by 2080 federal health care spending will reach
about 19 percent of GDP. That is, if the size of the federal government stays around
its historic average of 20 percent of GDP, health care spending will constitute
nearly all of federal spending that is not interest on the debt by 2080. The choices
are clear: either everything else must be cut from the budget (defense, education,
transportation), hea lth care costs must be reined in, or the size of government will
grow. Clearly, the current trends are not sustainable.
Although comprehensive health care reform had been shot down repeatedly
before 2010, several incremental reforms added up to substantial change. In 1996
Congress passed the Health Insurance Portability and Accountability Act, which
g uaranteed that people could not be denied hea lth care coverage when they switch
jobs. Med ica id wa s ex pa nded i n 1997 t o prov ide hea lt h ca re for ch i ld ren i n fa m i l ies
that make too much to qualify for Medicaid but not enough to buy private insur-
ance for their children (incomes that are no more than double the poverty level).
By 2011 more than 7.7 million children were enrolled in the program.^47 Under the
Bush administration Congress passed limited tax-free health savings accounts
that may be used for paying routine out-of-pocket health care expenses or saving