Trustees: Medicare's hospital fund strengthened by ACA, won't go bankrupt until 2030

About 10,000 beneficiaries join the program daily, report says

Medicare's trust fund will remain solvent until 2030, according to a report released Wednesday by Medicare's trustees. The trustees made the same prediction last year.

The trust fund covers the cost of Medicare's hospital insurance program. Other Medicare programs— such as those that cover prescription drug and outpatient care costs—are funded by premiums and federal budget allocations.

Why the fund is more stable

The report notes that the fund continued to be strengthened by the Affordable Care Act (ACA) and a slowdown in health care cost growth.

The ACA has helped "put Medicare on more stable footing by combating fraud, eliminating waste, cutting patient costs, and reshaping payment models toward quality of care, not quantity of care," says Department of the Treasury Secretary Jacob Lew, who serves as a trustee. In addition, Lew says the law enacted earlier this year to permanently replace Medicare's sustainable growth rate has also made the fund more stable.

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Details of report

According to the report, Medicare's hospital care coverage program insured about 1.6 million more U.S. residents last year than it did in 2013. The report noted the program gets about 10,000 new beneficiaries daily, as baby boomers reach age 65. In total, the program currently covers about 55 million U.S. residents.

According to the report, Medicare costs per beneficiary reached an average of $12,430 last year, up by 2% from 2013. The total average per-beneficiary cost included:

  • $5,400 for physicians and other outpatient care;
  • $4,900 for care received in hospitals and other facilities; and
  • $2,100 in prescription drug costs.

The report predicted Medicare spending will grow over the next five years by 6.7% for Medicare Part B and 10.9% for Medicare Part D.

Overall, the report estimates Medicare costs will increase from their current level of 3.5% of economic output to about 6% over the next 75 years, down from the roughly 6.8% the trustees predicted in last year's report. However, cost projections for the fund over the next 20 years remained mostly unchanged.

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According to the report, Medicare in 2030 will be able to cover 86% of its anticipated costs through payroll tax collections. That share would fall to 80% by 2050.

Reaction

The trustees called on federal lawmakers to enact laws to keep the trust from running out of funding. They noted in the report, "Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth ... Medicare still faces a substantial financial shortfall."

Andy Slavitt, President Obama's nominee for CMS administrator and current acting administrator of the agency, says that while "growth in per-Medicare enrollee costs continues to be historically low ... [officials] cannot be complacent." He adds, "That's why we must continue to transform our health care system into one that delivers better care and spends our dollars in a smarter way for beneficiaries so Medicare can continue to meet the needs of our beneficiaries for the next 50 years and beyond" (Timiraos, Wall Street Journal, 7/22; Muchmore, Modern Healthcare, 7/22; Zanona, CQ News, 7/22 [subscription required]; Pear, New York Times, 7/22; Lange, Reuters, 7/22; Alonso-Zaldivar/Ohlemacher, AP/Washington Times, 7/23).


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