Episode 1635 - The future of Medicare
#PTonICE Podcast
The Challenges and Solvency of Medicare
This chapter explores the financial challenges faced by Medicare, discussing the potential insolvency of the Hospital Insurance Fund and the issues with the Supplemental Medical Insurance Fund. It also raises questions about the adequacy of the current system and the potential consequences of decreased coverage.
Alan Fredendall // #LeadershipThursday // www.ptonice.com
In today's episode of the PT on ICE Daily Show, ICE Chief Operating Officer Alan Fredendall discusses the most recent round of cuts to Medicare reimbursements, why reimbursement is cut every year, and potential fixes to Medicare and the American healthcare system as a whole.
Take a listen to the podcast episode or check out the full show notes on our blog at www.ptonice.com/blog.
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EPISODE TRANSCRIPTION
INTRODUCTION Hey everyone, this is Alan. Chief Operating Officer here at ICE. Before we get started with today's episode, I want to talk to you about VersaLifts. Today's episode is brought to you by VersaLifts. Best known for their heel lift shoe inserts, VersaLifts has been a leading innovator in bringing simple but highly effective rehab tools to the market. If you have clients with stiff ankles, Achilles tendinopathy, or basic skeletal structure limitations keeping them from squatting with proper form and good depth, a little heel lift can make a huge difference. VersaLifts heel lifts are available in three different sizes and all of them add an additional half inch of h drop to any training shoe, helping athletes squat deeper with better form. Visit www.vlifts.com/icephysio or click the link in today's show notes to get your VersaLifts today.
ALAN FREDENDALL Good morning, PT on ICE Daily Show. Happy Thursday morning. Hope your day is off to a great start. My name is Alan, happy to be your host today. Currently have the pleasure of serving as our Chief Operating Officer here at ICE and the Division Leader in our Fitness Athlete Division. I hope your Thursday is going better than mine. Very, very sick as you can tell. I'll try to get through this. If it's too hard for you to hear me live here on Instagram or YouTube, when I mix this podcast here in about 30 minutes, I will boost the audio and try to clear up some of my raspiness. So hopefully you can hear me better on the podcast episode. So it's Thursday, it's Leadership Thursday. We talk all things business ownership, practice management, that sort of thing. Leadership Thursday also means it is Gut Check Thursday. This week's Gut Check Thursday is a true gutcheck-style workout. The harder you want to work, the sooner you will be done. So what is the workout? Every three minutes on the three minutes, including the start of the workout, so at zero, you're going to perform 40 double unders. you're going to perform 20 ab mat sit-ups, and then any remaining time you're going to do burpees. And you are done with this workout when you hit 120 burpees. So this workout rewards those of you who have unbroken double unders or who are willing to scale, maybe practice for 30 to 60 seconds, or just do single unders and move on. It also rewards folks who want to drop the hammer, especially early on in the burpees and get a big chunk of that work done out of the way. We recommend today that you read the Instagram post for this workout that was released last night to learn how to scale and modify this. What we don't want to see is people just doing double-unders or failing double-unders for three minutes and not getting their heart rate up, really not getting any double-unders or sit-ups or burpees in, and just kind of spending 18 minutes tripping over a jump rope. That's not the goal. So make sure you read that post and scale appropriately.
THE FUTURE OF MEDICARE Today, what are we talking about? We are talking about the future of Medicare. So if you are unfamiliar with Medicare, maybe you see patients who utilize Medicare insurance in your clinic, but maybe that's the extent of your knowledge. I recommend you go back to 2023. Look on our YouTube channel. and look up the four-part series, Mysteries of Medicare. And if you're a Virtual Ice subscriber, we're going to be condensing those four episodes into one brand new session for you that's going to actually premiere this coming Tuesday at 8.30 on Virtual Ice. So that's going to be a great resource to prime you for today's discussion. Today we're talking about Medicare cuts. It is something we hear all the time. Those of you who maybe work in cash therapy, I would urge you to continue to listen. I think we have a lot of room in the cash-based therapy space to work with these patients. We can see these patients, take cash from these patients, and have these patients get reimbursed for their visits from Medicare. if we're willing to do a little bit of extra paperwork. So I think this is an issue that affects the entire profession, affects the healthcare system in general, but it's not just something that insurance-based therapists need to deal with. It is ultimately going to affect our healthcare system as a whole. So today we're going to talk about the upcoming Medicare cuts. We're going to talk about the way that Medicare is divided and how that might look for the future of Medicare. And we're going to talk about maybe some potential ways that Medicare could be fixed.
MEDICARE CUTS So first, let's start with the cuts. If you haven't seen, we have a 3.4% cut coming in 2024. Those of you who have been practicing for a while, this is nothing new to you. Medicare has been cutting reimbursement for Most healthcare services, but specifically physical therapy, for most of physical therapy's existence. There really has only been one year that we didn't get a cut, and that's because we agreed to a 20% cut for physical therapy and occupational therapy assistance. So, PTs ourselves, OTs ourselves, we avoided that cut. And we passed the burden on to our assistants, which now is creating an employment issue with those folks because they don't get paid as much to do sometimes the same amount of work. So we have a 3.4% cut coming in 2024. And some of you are maybe upset about that. Some of you are maybe proactive and you wrote your state senator or whatever and that's great. But the question we hope to answer today is why should you care? We talked about this in the Mysteries of Medicare series. 10,000 people a day right now are becoming Medicare eligible every day until 2030. This is the height of the baby boomer era, the generation of those folks. hitting age 65 or older and becoming eligible for Medicare or otherwise enrolling into Medicare for the first time. So what we're going to see, and it's now 2024 if you haven't been keeping up the past couple days, what we're going to see over the next six years is that our population is going to go into an inverted pyramid where the vast majority of our population is going to be at the top of the pyramid. What does that mean? What are the implications of that? That means that over time, most of our population is going to become older adults. What are the implications of that? That means the majority of those folks are probably going to be using Medicare insurance for their healthcare needs. That means there's, if we look at it as inverted pyramid, where, let me do a pyramid with my hands. There we go. Kind of, whatever. That means those of us still working, there are less of us still working than there are those who are now drawing from those Medicare funds. And we could potentially be in a situation where both the Part A or the hospital insurance fund and the Part B or the supplemental medical insurance fund that we use in outpatient physical therapy could become insolvent, which doesn't mean bankrupt and we'll talk about that here in a second. So our second point today is what are those two funds and why do we keep seeing these cuts? We keep seeing these cuts because we are trying to stretch what is going to become a decreasing amount of money if absolutely nothing changes in our medical system, a decreasing amount of money over time to the point where maybe Medicare no longer pays for all services, some services, or part of some services.
FOLLOW THE MATH: HOW MEDICARE IS FUNDED So understanding how the money works is really important and that's what we're going to talk about right now. Medicare is split into two different trust funds. The first is Medicare Part A, or called HI, the Hospital Insurance Fund. This fund is separate from the Part B, or the Outpatient Supplemental Fund. This fund has enough money right now to be completely solvent, pay for 100% of hospital-based care until 2028, even if every single person working right now stopped paying Medicare tax. Now, that doesn't mean it's going to be solvent forever. It is forecasted that this fund will slowly become insolvent beginning in 2031, unless somehow the money that those of us still in the workforce paying into the system exceeds what those who are drawing out of it for healthcare services slows down, right? If we can get to a place where revenue begins to exceed expenses again. I don't think that's possible. Let's talk about why. We need to understand that those of you and those of us who are in the workforce still and seeing those payroll taxes come out of our paycheck, only 3% of that goes towards Medicare. That means that we only need to pay 40 quarters or about 10 years of that tax into Medicare in order to have 100% premium free hospital insurance also called Medicare Part A from Medicare. What we should know is that also covers your spouse even if your spouse never worked a day in their life. You and your spouse both get access to that. for just paying into that fund 3% of your paycheck every paycheck for 10 years. So let's do some hypothetical math. Let's keep it simple. Let's look at nice even numbers. Let's say that you're a physical therapist and you make $75,000 a year and your spouse has never worked and will never work in their entire life. That means you're gonna get about $2,884 per paycheck, and that means about every paycheck, you're gonna pay $87 towards Medicare for you and your spouse. Across the 10 years, or 120 months, or 40 quarters, or however your brain makes sense of that, that means that you're gonna pay about $10,000 and a half into Medicare. Now already some of you are saying, wait a second, that doesn't seem like a lot of money, especially for potentially two people. And you're exactly correct. Is $10,500 enough to justify the government paying for 100% of your hospital costs from the time you turn age 65? until whenever you die. 70, 80, 90, 100, 108, 115. And even if you're really bad at math, you should know that across 10 or 20 or 30 or maybe even 40 years of living, you're definitely going to exceed $10,000 in healthcare costs. And already we're kind of understanding the problem that Medicare has. So it's expected over time that this hospital-based fund will drop and become insolvent. What does that mean? It doesn't mean it's out of money, it's not bankrupt, it just means that what we're going to continue to see happening is going to continue happening. We're going to see reimbursement be cut, we're going to see more restrictions on folks getting access to care, and ultimately we'll get to a point where the fund is insolvent, which means now 100% is no longer possible. Maybe you go into the hospital and you had a heart attack, and you need a bypass and it costs you $50,000, maybe now Medicare only pays 80% of that, right? And now you owe 10 grand to the hospital, which if you're 80 years old, you probably don't have 10K in cash just hanging out to pay, right? So already, again, you begin to see the compounding of the finances in a way that is not sustainable. The other fund that money goes into is the Supplemental Medical Insurance Fund, SMI. This is also known as Medicare Part B. Those of you working in outpatient, this is what you interact with. This does not get money primarily from our taxes. This is primarily paid for by premiums that you pay to the government when you turn 65. As of right now in 2024, that's about $175 a month or about $2,100 a year. And that works on an 80-20 system. We explained this a bit back in the Mysteries of Medicare series, that if you go to physical therapy and it's $100, Medicare pays $80, the patient owes $20. Now the question again is, is $2,100 a year enough to offset how much a patient may use of outpatient costs? And again, those of you who maybe are even really bad at math and you get nervous around math, you don't have to be a math genius to understand that's not gonna cut it, right? The average Medicare patient consumes $16,000 a year of healthcare money. So is $16,000 more than $2,100? Yes, it's eight times more money, right? That means that the average person is consuming eight times more money from Medicare than they pay into it. Again, we begin to see the compounding financial problem that the math does not check out and has not checked out for a long period of time, which begins to explain why we are continually trying to stretch these funds. as long as possible. What we are doing with these cuts is essentially kicking the can down the road and hoping that something happens in the future where our population increases and we suddenly have more young people than old people that are paying into the system and these funds can potentially become solvent again.
CAN MEDICARE BE FIXED? So, our third point, summarizing here, bringing all these points together, can this be fixed? Currently, this is a very broken system for all the reasons that we just explained. The average person consumes more money than they paid into initially or currently pay into with their premiums. We are definitely on track to become insolvent, which means payments are going to continue to decrease and that Medicare is no longer going to be able to cover all or part of some services, which means patients are going to have to pay for more and more out of pocket. What do we know that translates into? Well, when people don't have access to health care, they tend to not use health care. until they absolutely need it, right? They stop going to primary care appointments, they stop going to physical therapy, they only enter the healthcare system when their symptoms are now impacting their daily function. They're now ready to go into urgent care or the hospital, right? So what do we need to happen? We need to have a drastic reduction occur in the costs that we consume from this system in such a way that the revenue begins to exceed the costs again. What does that look like? At the end of the day, that looks like we need to have a significant decrease in how much health care the average American consumes. This is where we make our case for rehab, right? Somebody seeing you one or two times a week for maintenance therapy on Medicare that does not require any medications, any surgeries, any hospitalizations, that person is going to consume way less money than they would on average if they were not staying in shape and working with a physical therapist, right? This is how we justify our utility to the healthcare system. We need to make a significant dent in the chronic disease epidemic if we're ever going to have a hope of fixing this system. Now, I'm not a pessimist. I'm also not an optimist. If you know me very well, I would consider myself a realist. I'm not the person that's going to clap it up for you and tell you you're doing a good job, but I'm also not the person that has a bunker full of, you know, 15 years of canned goods and batteries and solar panels and that sort of thing. I'm kind of right in the middle. The realist in me says that we're not going to be able to turn this ship around in time to fix this. and that if you're listening right now and you're of working age, that you should do everything possible to ensure that you do not need to rely on Medicare yourself for your health insurance. when you will be Medicare age. You should also expect that the age to become eligible continues to get pushed back. It's not unrealistic to think that those of us who maybe are in our 30s or 40s now that in 20 to 30 plus years you may have to be 70 or 72 or maybe even 75 to begin to collect those Medicare benefits. That means you need to be able to provide your own insurance or otherwise pay for your own health care or Humor me, exercise enough so that you don't need to use a lot of health care because it's not going to be available for you anyways, right? And this is the message we need to imprint on our patients, especially if we can get them younger, right? Especially if we can get that 19 year old World of Warcraft player who doesn't like to exercise shake that person Spencer damn it will you please go and pick up some heavy stuff a couple times a week and get your heart rate up because you're looking at a really long life of decreasing quality and quantity of life and oh by the way in your future because you're so young nobody is going to be around probably to help you pay for that so we need to be realistic about that as well we need to understand why these cuts happen and There is absolutely, I believe, nothing we can do to stop or reverse these cuts. They happen across the board. They're beginning to happen to physicians as well. Everybody is being affected because we're getting closer and closer to that time point where these funds are going to slowly become insolvent.
SUMMARY So that's Medicare, that's why we have cuts, why we have cuts every year. Why do we have cuts? We are stretching a limited amount of money and hoping for a brighter future to magically stumble along where somehow we start having more children so that our population shifts to have more young than old again, and also maybe a future where enough people take care of themselves to the point where they don't need to consume $16,000 a year on average from the healthcare system. Is it possible? I don't know. Call me in 10 years and check in with me. But I think it's important that we understand this baseline and have a knowledge of this both for ourselves to understand why sometimes in the clinic things happen the way they do and also to better educate our patients Hey, in the future, especially those folks who are younger or middle-aged, there's no one coming to save you. We need to find you something that you like to do every day so that you can save your future self, right? I love what the older adult division says. We're all older adults in training and we need to start acting like it. There may potentially be a future where there are no safety nets for us. It's you against the world. At the end of the day, if you have some sort of issue that causes you to enter the healthcare system, then we need to begin to prepare our bodies for that potential future. So if you're a Virtual Ice member, join us on Tuesday. We're going to talk a really deep dive into Medicare. We're going to talk about why it's relevant, yes, to insurance-based clinicians, but also how cash-based therapists can interact with Medicare patients as well in a legally compliant way that still sees them get paid for working with Medicare patients. So I hope you have a wonderful Thursday. Have a great weekend. We'll see you next weekend. Bye, everybody.
OUTRO Hey, thanks for tuning in to the PT on Ice daily show. If you enjoyed this content, head on over to iTunes and leave us a review, and be sure to check us out on Facebook and Instagram at the Institute of Clinical Excellence. If you're interested in getting plugged into more ice content on a weekly basis while earning CEUs from home, check out our virtual ice online mentorship program at ptonice.com. While you're there, sign up for our Hump Day Hustling newsletter for a free email every Wednesday morning with our top five research articles and social media posts that we think are worth reading. Head over to ptonice.com and scroll to the bottom of the page to sign up.
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