I wanted to find the cost to Medicare for Part D, the drug plan for Medicare beneficiaries that went into effect in 2006.  I googled “Part D Medicare budget” and got very good information.

In 2010, Part D made up 13.4% of the Medicare budget, or 68 billion dollars.  So even with seniors paying premiums for their Part D plans that range from $15 to $90 per month, Medicare still paid out $68 billion in 2010 to pay for their drugs!

Then I came across an opinion piece From Forbes magazine (Nov. 20, 2009). The entire piece can be read by clicking on this link, but here are some parts I found particularly interesting:

Bruce Barlett wrote in Forbes:

…Recall the situation in 2003. The Bush administration was already projecting the largest deficit in American history–$475 billion in fiscal year 2004, according to the July 2003 mid-session budget review. But a big election was coming up that Bush and his party were desperately fearful of losing. So they decided to win it by buying the votes of America’s seniors by giving them an expensive new program to pay for their prescription drugs.

Recall, too, that Medicare was already broke in every meaningful sense of the term. According to the 2003 Medicare trustees report, spending for Medicare was projected to rise much more rapidly than the payroll tax as the baby boomers retired. Consequently, the rational thing for Congress to do would have been to find ways of cutting its costs. Instead, Republicans voted to vastly increase them–and the federal deficit–by $395 billion between 2004 and 2013.

However, the Bush administration knew this figure was not accurate because Medicare’s chief actuary, Richard Foster, had concluded, well before passage, that the more likely cost would be $534 billion. Tom Scully, a Republican political appointee at the Department of Health and Human Services, threatened to fire him if he dared to make that information public before the vote. (See this report by the HHS inspector general and this article by Foster.)

…the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit, whereas the health reform measures now being debated [in 2009] will be paid for with a combination of spending cuts and tax increases, adding nothing to the deficit over the next 10 years, according to the Congressional Budget Office. (See here for the Senate bill estimate and here for the House bill.)

….It astonishes me that a party enacting anything like the drug benefit would have the chutzpah to view itself as fiscally responsible in any sense of the term. As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt. Space prohibits listing all their names, but the final Senate vote can be found here and the House vote here.

Bruce Bartlett is a former Treasury Department economist

I had an appointment yesterday with my tax accountant who is over 65 and on Medicare.  She is my accountant but not my client, but she asked me about a bill she got from her dermatologist.  The bill showed the charges for her treatments in the office, and it showed what Medicare paid and what her Medicare supplement paid.  It looked like the doctor’s office was “balance billing her” – though I didn’t look that closely at the bill.  I told her to call the doctor’s office and ask for an explanation of the bill.

One clue I did not pick up on:  The amount due was $162.

Second clue: This lady has a Plan N Medicare supplement.

As I drove away from the appointment, my cell phone rang.  It was my accountant calling to tell me she had spoken with the doctor’s office about the bill. They told her she has a deductible in her coverage, and that’s what the $162 is.

Duuuuuuh! How could I forget that?  Medicare Part B has a $162 deductible, and Plan N does not cover it.  Plan N has a lower premium than a Plan F or C because a person must pay a $20 co-pay when they go to a doctor’s office. They also pay a $50 co-pay if they go to the emergency room.  And they pay the Part B deductible each year ($162 in 2011).

I am an insurance agent and I forgot about the Part B deductible not being covered by Plan N.  (Of course, I was not in my working-and-explaining-Medicare-mode when I was meeting with my tax accountant.) I can see lots of folks getting Plan N for a lower monthly premium and then having greater confusion when they get their medical bills.

I usually suggest people get a Plan F Medicare supplement. “Think F as in full coverage”, I say.  With Plan F they don’t have to worry about co-pays and deductibles because Plan F fills all the gaps in Medicare.  I have had several clients who were diagnosed with cancer, and they called me specifically to tell me how grateful they were to have a Plan F Medicare supplement because they never had to think about their medical bills.

I just thought I’d pass on this tidbit of wisdom I gained this week.

I like to share things I learn from sources across the internet.  Sometimes a picture is worth a thousand words, so here is a graph that was included in today’s post from the Time Goes By blog.

The graph is based on data from the Congressional Budget Office regarding average household income from 1979 to 2007.

The graph clearly shows that the rich got richer over the last thirty years while average Americans saw no rise in their household income (after inflation).

How did this happen?  Maybe average Americans didn’t work hard enough.