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Medicare Medicare Presentation Transcript

  • When Will Medicare’s Size Force Action? 22 Boardroom Vanessa Sochat August 14, 2006
  • When Will Medicare’s Size Force Action? Answer – Within 3-6 years
  • Medicare Overview
  • Four Main Questions Why is Medicare spending growing? How big will spending get? How will the government really act? What is the most likely future scenario?
  • Medicare Is Eating Up The Economy
  • What Is Feeding This Spending Monster? Demographics Costs of technology Prescription drug benefit Inefficiencies
  • Enrollment Is Increasing 1.74% Annualized Growth Rate
  • Less People Are Dying, and The Birth Rate Is Decreasing Growth of Birth and Death Rates (%)
  • Total Costs Per Capita Prescription Drug Benefit January, 2006 Annualized Spending/ Capita Growth Rate Estimates Low 5.13% Intermediate 7.31% High 9.46% Medicare Cost Per Capita ($)
  • The Government Is Financing This Spending Linear Regression Medicare Spending as a % of Federal Government Spending Spending as a % of Federal Spending
  • Beneficiaries Are Contributing More Premiums of the HI Trust Fund – Part A ($)
  • We Are Depleting Our Funds MEDICARE COSTS (billions) Today 2009 2015 Total Income 446.7 561.83 780.1 HI 210.2 245.7 320.3 SMI 236.5 316.13 459.8 Total Expenditures 432.9 537.5 818.2 HI 200.5 242.2 362.5 SMI 232.4 295.3 455.7 Balance Total 13.8 24.33 -38.1 HI 9.7 3.5 -42.2 SMI 4.1 20.83 4.1 Income and Expenditures of Medicare
  • Is The Government Proactive? A Quiz Looking at 12 attempts to reduce spending from 1965 to 2006: • How many attempts reduced spending? — (represented by a negative growth rate) • How many attempts increased spending? — (represented by an increase in the growth rate) 1 5
  • What Do We See In The Crystal Ball? 2008 HI Expenditures Exceed Income Bush submits remedial legislation to Congress Depletion of HI Trust Fund HIGH 2008 Elections Depletion of HI Trust Fund INTERMEDIATE Prescription Drug Benefit Total Expenditures Exceed Income 2009 2010 2011 2012 2013 2014 2015 2016 2018 2005 2006 2007 2017
  • What Can We Rule Out? Corrective action in 2008 Reduction of benefits for low to middle income beneficiaries
  • What Can We Rule In? Higher taxes/premiums More investment in cost efficiencies, outsourcing, import generic drugs More pressure from the government to drug companies and health care providers (private health insurance and medical savings accounts) Change in age of eligibility
  • The Government Has Leverage To Control Drug Prices
  • This Is An Easy Way For The Government To Get Money Pharmaceutical vs S&P 500 Net Profit Margins
  • Who Will Be In Office? It doesn’t really matter The White House is up for grabs • Democrats will claim more seats, but there will be no significant majority — Tackling big issues (Medicare) a challenge • If Democrats control Congress, possibilities include — Lower Medicare drug prices & HMO payments — Tougher drug safety law ®
  • Conclusions Bush submits remedial legislation to Congress, 2007 Small House and Senate majorities make passing anything very difficult We hit murky water in 2009 Between 2009 and 2012 we will see drug price negotiation Benefits won’t be taken away from lower to middle income beneficiaries So richer beneficiaries will pay their way by 2012 ®
  • What Are the Larger Implications? The Government looks for easy places to get money: • Beneficiaries • Drug Companies • Itself Healthcare investing gets tougher
  • ®