What will Donald Trump's return mean for Medicare?

What will Trump's return mean for Medicare?

November 11, 2024 3:49 PM

Former president Donald Trump has vowed to repeal the Inflation Reduction Act, which directly affects Medicare.

On January 20, Donald Trump will begin his second term as president after four years away from the White House. During those four years, Medicare underwent major changes — changes that Trump has fiercely opposed. What will happen to the program now?

As with Social Security, Trump has repeatedly vowed to keep his hands off Medicare. His campaign website promises, in all capital letters, to "FIGHT FOR AND PROTECT SOCIAL SECURITY AND MEDICARE WITH NO CUTS, INCLUDING NO CHANGES TO THE RETIREMENT AGE."

What complicates that promise is the Inflation Reduction Act. That multifaceted law, which Democrats passed in 2022, took aim at both climate change and health care costs for seniors. For Medicare recipients, the IRA sets a cap on out-of-pocket expenses, limits the price of insulin, makes vaccines free and — most significantly — allows Medicare itself to negotiate the prices of drugs.

Trump wants to repeal all that.

"My plan will terminate the Green New Deal, which I call the Green New Scam," he said in September. "We will rescind all unspent funds under the misnamed Inflation Reduction Act."

Scrapping the law may prove difficult — recall, for example, Trump's failed struggle to repeal Obamacare — but not impossible. What could that mean for retirement?

"We've been telling financial advisors they need to make sure that people understand what the potential impact will be, not only for the current retirees, but for future retirees," said Ron Mastrogiovanni, president of the cost-projecting software company HealthView Services.

Here's a look at how Medicare might change under Trump Part II:

More out-of-pocket expenses

One of the key provisions of the Inflation Reduction Act was to set a hard limit on how much seniors pay for medicine. Under the new law, out-of-pocket expenses for Medicare recipients will be capped at $2,000 per year, starting in 2025.

Or not. If Republicans successfully repeal the IRA, the new limit will fall by the wayside.

"Be prepared for higher out-of-pocket expenses," said Mary Johnson, a retired Social Security and Medicare analyst. "Republicans tend to want the public to be responsible for a bigger portion of the cost."

Many analysts have predicted that repealing the IRA might meet resistance in Congress — even from some Republicans, whose districts have benefited from some of the law's green energy provisions. But Trump could still whittle away at it by capping or phasing out certain measures. And in any case, Johnson said, limiting Medicare's reach is a cause to which the GOP is already inclined.

"What I expect to happen is that there will be more of a push of people into private plans," she said. "For seniors, what it's going to mean is we are going to be paying much more."

Beware of 'more options'

For many years, Republicans have floated plans to privatize Medicare, in part or in full. In 2016, former House speaker Paul Ryan famously proposed turning the whole program into a form of private insurance.

And in fact, there is already a private form of Medicare available: Medicare Advantage. This insurance product, sometimes advertised as "Medicare Part C," is an alternative to the federal program. But while it covers some expenses that the public Medicare does not — e.g., dental care, vision, hearing aids — it does not cover hospital visits and doctor appointments nearly as thoroughly.

When Trump returns to the White House, and especially if the GOP retakes both houses of Congress, some analysts expect more of a push in that direction.

"The other thing Republicans are looking at — and President Trump has brought this up — is providing more options for retirees," Mastrogiovanni said. "What that means is, in today's language, more Medicare Advantage or something similar to Medicare Advantage."

A higher retirement age?

Like Social Security, Medicare is rapidly drifting toward insolvency. According to the program's Board of Trustees, its trust fund is on course to become depleted by 2036.

That's only if Congress does nothing — and there are solutions available, at least in theory. While Democrats typically favor fixes on the revenue side, like raising payroll taxes for the very wealthy, Republicans tend to prefer solutions on the benefit side, like raising eligibility ages. That's where Mastrogiovanni sees things heading under Trump.

"I think the retirement age of 65, when you can receive your Medicare benefits — I believe that will change," Mastrogiovanni said. "Because the Medicare trust fund has the same type of issues [as Social Security], that's going to change, probably to 66 or 67. And that impacts a lot of people."

Of course, this would directly contradict Trump's campaign promise. Would he go that far? His record offers little clarity. During his first term, Trump generally left Medicare alone, even as his proposed budgets called for cuts. But once he returns to office, could reform-minded Republicans and lobbyists have his ear?

"He's going to have people in there who are familiar with these policies, and who will push through more of a hands-off, small government approach," Johnson said. "And in return we're going to get more freedom of choice. Well, right now we do have freedom of choice, and most people are so confused that they're frozen and don't know what to do."