The most recent trustees’ report forecasts that the Medicare trust fund will be exhausted in 2030. While that is a financially frightening prospect, there was good news buried in the report: the previous forecast indicated the funds would be gone in 2026.
I believe there are reasons to be far more optimistic. Here’s why:
1. There are cheaper medical services on the way. Theranos has a totally new approach to blood analysis as an example. Founded by Elizabeth Holmes, and backed by a who’s who, Theranos has micro labs that can be installed anywhere and only require a few drops of blood. Millions of us troop to a Quest Diagnostics center, or one of its competitors, to have our blood chemistry tested for any of thousands of things like cholesterol levels, hepatitis presence, insulin and blood sugar and so on. Quest, of course, bills the patient, and/or the patient’s insurer, including Medicare. Theranos is an example of a better, cheaper, faster option. While its new process must make it through the FDA approval minefield, I expect it will eventually become a real alternative, certainly before 2030. And, due to FDA leadership, the Obama administration or both, the FDA has actually shown some needed speed and flexibility recently.
2. There are new ways to clean hospital rooms. There are a number of life-threatening illnesses that, from a practical point of view, can only be caught in a hospital or a nursing home. Nasty strains of pneumonia. The debilitating clostrium difficile. In its April 2013 report, Antibiotic Resistant Threats in the United States, the CDC estimates 23,000 Americans die each year from microbes that are resistant to current treatments. It states “The estimates are based on conservative assumptions and are likely minimum estimates”. Many, if not most, of these deaths are a result of infections acquired in a hospital. Patients are treated with a series of more and more toxic (and expensive) antibiotics in hopes of curing the infection. Xenex Healthcare now provides robots that disinfect hospital rooms with high-intensity bursts of light. Savings to patients (copays and out-of-pockets), insurers and underwriters including Medicare should run into the billions.
3. There are new antibiotics on the way. Again, treatment of patients infected with superbugs is expensive. Patients may be in high-cost intensive care units. Better antibiotics can prevent or reduce most of those costs. Most pharmaceutical companies have walked away from antibiotic research. From an investment viewpoint, that decision makes a lot of sense. FDA approval is gigantically expensive. If approved, an antibiotic may only be used for a few doses. And if patients are sickened, have reactions or die as a result of an antibiotic treatment, lawsuits are certain to follow. Therefore pharma has moved research to the treatment of chronic illnesses like diabetes, where they may have a customer for twenty years, thirty or even longer. But there are some firms that are investing in antibiotics. Northeastern University, in conjunction with NovoBiotic, have announced isolating Teixobactin, a soil-dwelling bacteria that doesn’t get along with MRSA (methicillin-resistant Staphylococcus aureus), one of the most evil superbugs. Testing so far indicates that Teixobactin is well-tolerated in mice and kills a variety of bad actors.
4. Eventually, we hope that auditing will catch up with the bad guys. Years ago, some Medicare official stated that as much as ten percent of Medicare billings are fraudulent. Apparently that was based on pretty flimsy analysis. However, there is at least anecdotal reason to believe it could be more than ten percent – actually a lot more. Some future Congress and Administration will likely chose to apply the same data techniques that Visa, Mastercard and American Express apply to spot fraudulent card activity in seconds. That alone might be enough to add several more years of life to the trust fund.
While I’ve shown four reasons, in reality they boil down to fewer. Science and technology underlie all. That makes me optimistic that people will live longer and healthier, and Medicare won’t run out of money as fast as feared.