Report: Medicare Solvency Extended by Four Years, Bolstered by ACA
According to the report, the fund has been strengthened by the Affordable Care Act and other health care cost-curbing measures.
Specifically, the report stated that:
- Medicare Part A, which pays for hospital care, has been significantly strengthened, and its solvency has been extended by 14 years since the ACA was enacted in 2010;
- Spending on hospital stays in 2013 was lower than expected (Goldstein, Washington Post, 7/28); and
- Medicare Part B premiums likely will remain constant through 2015.
Further, Medicare public trustee and former Congressional Budget Office Director Robert Reischauer said that Medicare's cost per beneficiary has remained the same for two years (Lauter, "Politics Now," Los Angeles Times, /28).
However, the trustees predicted that the average cost per beneficiary would increase by around 40% by 2023, from $12,210 last year to $17,360 (Pear, New York Times, 7/28).
The trustees noted that full reasons for the extended solvency are not yet known. HHS Secretary Sylvia Mathews Burwell said that it is not yet possible to know exactly how much of the fund's improved fiscal health can be attributed to the ACA instead of other cost-curbing changes in the health care system (Washington Post, 7/28). The economic downturn was also cited as a possible reason for a slowdown in health care spending (Paletta, Wall Street Journal, 7/28).
The report stated that reforms still are needed to ensure Medicare "can sustain projected long-run program costs." During a news briefing yesterday, Department of the Treasury Secretary Jack Lew called on Congress to "make manageable changes now, so we do not have to make drastic changes later."
The report noted that Medicare is continuing to feel strain from an aging population and other pressures, such as scientific advancements in treatments (Washington Post, 7/28). This year, around 54 million people are enrolled in the program. The number of beneficiaries is expected to increase to more than 81 million by 2030 and keep growing (Sanger-Katz, "The Upshot," New York Times, 7/28).
In addition, Medicare Part A paid about $261.9 billion in hospital care costs last year and spent $4.3 billion in administrative costs. However, the program only took in about $251.1 billion in revenue, drawing $15.1 billion from the trust fund to cover its expenses (Wall Street Journal, 7/28).
Reischauer noted that Medicare costs likely will continue to increase faster than worker's earnings, retirees' incomes and the entire economy (Faler, Politico, 7/28). According to the report, Medicare is expected to comprise 5.5% of the country's gross domestic product by 2040, up from 3.5% now (Tahir, Modern Healthcare, 7/28). Specifically, the report noted that over the next five years:
- Medicare spending on outpatient care will grow by an average annual rate of 5.7%;
- Medicare spending on prescription drugs will increase by an average annual rate of 9.9%; and
- Inpatient hospital costs will increase by an average of 3.9% (Adams, CQ Roll Call, 7/28).
If the program is not reformed by 2030, when it is projected to become insolvent, Medicare will only be able to pay for 85% of beneficiaries' hospital care. That proportion will continue to decrease to 75% by 2047, according to the report (Washington Post, 7/28).
CMS Actuary Less Confident
Meanwhile, CMS' Office of the Actuary in a separate report released Monday indicated that Medicare's future is "bleaker than the report suggests," the New York Times' "The Upshot" reports.
According to the actuary, health care cost reductions under the ACA that have helped keep program spending down likely will become too difficult for hospitals to sustain in the long term. As a result, the actuary expects those reductions eventually will be overturned by Congress ("The Upshot," New York Times, 7/28).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.