Before President Trump was elected, one of his campaign promises to Americans was that he would not touch Medicare or Social Security. He has now proposed a budget plan for Medicare, which he claims will make it easier for seniors to opt out of Medicare. Under his plan, Americans would also be able to put more money into HSA accounts. Democratic lawmakers are worried that, if the proposal does go through, the Medicare changes and it’s funding levels will be drastically reduced.
Opting Out Of Medicare
Under the current system, as long as you are signed up for Social Security, you will be automatically signed up for Medicare Part A when you turn 65.
One of Trump’s proposals is to allow people to opt out of Medicare Part A (hospital insurance), without their decision interfering with their Social Security benefits.
Health Savings Accounts (HSAs) are offered to people with high deductible health insurance plans. These accounts come with tax benefits. You can make tax-free contributions, as well as make tax-free qualified withdrawals from the account. Medicare beneficiaries cannot contribute to these accounts, even if they are just on Part A or have a high deductible plan.
However, Trump wants to give Medicare beneficiaries with high deductible health plans the ability to make tax-deductible contributions to HSAs or medical savings accounts (MSAs).
Other Medicare Changes
Further proposals by Trump would not structurally change the Medicare program, reduce the benefits, or limit eligibility for Medicare. Other changes in the proposal are similar to President Obama’s past budgets. They include:
- Doctors would be paid the same price for services, regardless if they work for a hospital or private practice
- Reduce payments in long-term care hospitals for patients discharged from a regular hospital.
- Reduce prices for prescription drugs.
Republicans believe that some reduction in the growth of the program and/or an increase in funding is necessary, and they believe that allowing older adults to opt out of Medicare would help to fund the program. The trust fund Medicare Part A hospital insurance is projected to be insolvent in 2026, meaning the trust fund would be empty and payroll taxes wouldn’t be enough to cover all of the necessary spending.
“A big boost in the economy could potentially extend the life of the trust fund a bit,” says Tricia Neuman, senior vice president and director of the Program on Medicare Policy at the nonpartisan Kaiser Family Foundation. “But even with a tailwind, policymakers will need to reduce Medicare spending, increase revenues or both to keep the trust fund solvent for an extended period of time. That said, there are a number of policies that could be considered to extend the life of the trust fund beyond those proposed in the Administration’s budget.”
Medicare beneficiaries could also benefit from some proposals. KFF’s Neuman says it is “conceivable” that provider payment changes to hospitals would reduce Medicare spending growth “which could potentially slow the growth in Medicare deductibles.”
Democrats argue that the Trump administration’s budget proposals would cut Medicare beneficiaries’ access to care. They also argue that the proposed HSA changes would only benefit higher income Medicare beneficiaries.