Medicare Recipients and Costs

In the context of the health care reform debate, I became curious about the participation and cost of Medicare and following are some of the key facts:

• The cost of Medicare in fiscal year 2007 was $440B.
• As of 7/1/2008, there were 37,584,186 aged persons and 7,717,651 disabled persons for a total of 45,301,837 people receiving Medicare in the US which equates to a $9,712 per recipient cost. Note that people younger than 65 are eligible to receive Medicare 24 months after qualifying for Social Security Disability payments.
• In order to qualify for Medicare, you must be a US citizen or legally resident for 5 years or more and you or your spouse must have paid into Medicare for at least 40 quarters (10 years) in which case your monthly premium for Medicare Part A (hospitalization) is $0. However, if you have less than 40 quarters you can "buy in" by paying $244 per month if you have 30 to 39 quarters of qualifying income or $443 per month if you have fewer than 30 quarters.
• All Medicare recipients have a monthly premium of $96.40 per month (this changes every year) for Part B (outpatient services such as doctor visits).
• Approximately 99% of recipients have Medicare credit for at least 40 quarters but not necessarily for payments into the US Medicare system.
• The US has what are called Totalization Agreements with 24 countries that count participation in a foreign system for purposes of qualifying for US Medicare. I'm not sure if the US has a Totalization Agreement with Mexico. Totalization Agreements must be approved by Congress which has not approved a Totalization Agreement with Mexico but it appears that the Bush Administration signed a Letter of Understanding which provides the same benefits as a Totalization Agreement.
• Totalization Agreements were originally intended to avoid additional costs for an employee of a company in one country who was temporarily assigned to a foreign work location by not requiring payments into the social security systems of both countries. In practice, someone who has paid into the US social security system for at least 6 quarters is able to count years paying into a foreign social security system when calculating eligibility and monthly pension in the US social security system. The US Social Security system counts all quarters for which payments were received regardless of whether the worker was in the US legally.
• Generally, Medicare will only pay for medical care received in the US although pension checks can be sent to people resident in a foreign country.

I am surprised by what I consider to be a very low cost of $9,712 per Medicare recipient which, given the age of most recipients, I would expect to be much higher.

However, I find several points in the above facts disturbing which may point to some options to reduce Medicare costs.

• 7.7 million people receiving Medicare under disability seems way too high to me. I suspect that a significant number of these people may no longer qualify for disability. By law, the Social Security Administration can review a disability annually to determine whether the recipient still qualifies. I also believe that disability qualification requirements are not stringent enough and should be tightened.
• Someone 65 or older who has never paid into Medicare is able to buy coverage for a maximum premium of $539 per month. This seems way too low for a senior who would likely pay over $1,500 per month for a private insurance policy which would cover much less than Medicare.
  
• The Totalization Agreements should be revamped. A citizen of one country who is an employee of a company in their home country who is assigned overseas should only pay into the retirement system of their home country and should only receive qualifying credits for the retirement system of their home country. As an example, an employee of GE in New York who was assigned to a GE facility in Poland for 5 years should only pay into the US retirement system and should only receive US retirement system credits for those 5 years and not receive any credit for Polish government. However, as the Totalization Agreements are currently constructed, if a Polish citizen works as a store clerk in Poland and pays into the Polish retirement system for say 8.5 years and then comes to the US, even if they are here illegally, and pays into the US retirement system for 18 months then they fully qualify for US retirement and Medicare.