Report: Medicare Spending and Financing

In a new report, by the Kaiser Family Foundation, with data collected from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary (OACT), the 2016 annual report of the Boards of Medicare Trustees and the 2016 Medicare baseline and projections from the Congressional Budget Office (CBO), it point towards a rise in Medicare spending. Here is an overview of Medicare spending from the report: The Facts on Medicare Spending and Financing.

  1. Medicare as a share of the federal budget in 2015: 15%
  2. Medicare accounted for 20 percent of total national health spending in 2014, 29 percent of spending on retail sales of prescription drugs, 26 percent of spending on hospital care and 23 percent of spending on physician services.
  3. In 2015, Medicare benefit payments totaled $632 billion. Twenty-three percent of that sum was for hospital inpatient services, 12 percent for the Part D drug benefit and 11 percent for physician services. Twenty-seven percent of benefit spending was for Medicare Advantage private health plans covering all Part A and Part B benefits.
  4. Medicare spending growth has slowed in recent years compared to prior decades, both overall and per beneficiary, according to the report. Average annual growth in total Medicare spending was 4.4 percent between 2010 and 2015, compared to 9 percent between 2000 and 2010. That’s despite faster growth in enrollment since 2011 with the baby boom generation reaching Medicare eligibility age. Additionally, average annual growth in spending per beneficiary averaged just 1.4 percent between 2010 and 2015, compared to 7.4 percent between 2000 and 2010.
  5. Slower Medicare spending growth in recent years is attributed in part to policy changes that took effect as part of the Affordable Care Act and the Budget Control Act of 2011, according to the report. For example, the ACA included reductions in Medicare payments to plans and providers, while the BCA lowered Medicare spending through sequestration that reduced payments to providers and plans by 2 percent beginning in 2013, according to the report. Slower Medicare spending growth is also attributed slower growth in prescription drug spending and a reduction in inpatient hospital readmissions, among others.
  6. In the last 25 years, Medicare spending has grown at a slightly slower rate than private health insurance spending on a per enrollee basis, the report notes. Between 1989 and 2014, Medicare spending per enrollee grew at an average annual rate of 5.5 percent, somewhat slower than the 6.3 percent average annual growth rate in private insurance spending per enrollee over that time period. Between 2000 and 2010, per enrollee spending growth rates were comparable for Medicare and private insurance. Between 2010 and 2015, however, Medicare per capita spending grew considerably more slowly than private insurance spending, increasing at an average annual rate of just 1.4 percent over this time period, while average annual growth in private health insurance spending per capita increased at just over twice that rate (3 percent).
  7. Looking forward, net Medicare spending, meaning mandatory Medicare spending minus income from premiums and other offsetting receipts, is projected to increase from $591 billion in 2016 to $1.1 trillion in 2026, according to the Congressional Budget Office. The CBO projects total Medicare spending to increase from $695 billion to $1.3 trillion over this time period.

Sources: Kaiser Family Foundation,  Centers for Medicare & Medicaid Services (CMS) Office of the Actuary (OACT), the 2016 annual report of the Boards of Medicare Trustees, the 2016 Medicare baseline and projections from the Congressional Budget Office (CBO),

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