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Medicare's financial outlook improves



July 29, 2014
Area(s) of Interest: Access to Care Advocacy 

Trustees overseeing Medicare’s Hospital Insurance Trust Fund, which finances about half the health program for seniors, said Monday in a report that the program won’t run out of money until 2030 – that’s four years later than projected last year and 13 years later than projected at the passage of the Affordable Care Act (ACA).

The outlook for Medicare improved largely because of lower-than-expected hospital spending and savings resulting from the ACA. The effect of the new law encouraged providers and Medicare Advantage insurers to deliver care more cost-effectively and also reduced payments to hospitals and providers. Some of the cost savings may also be the result of a sluggish economy and continued high unemployment, the report said.

The report also predicts that the average spending per Medicare beneficiary will grow about 40 percent in the coming decade, to $17,360 in 2023, with outlays expected to rise much faster for prescription drugs and doctors’ services than for inpatient hospital care.

The trustees took out the sustainable growth rate (SGR) cut to physician reimbursement for the financial projections for this report. Leaving out the SGR cuts should make the cost projections more solid as they are based on realistic assumptions of a modest physician pay hike rather than an unrealistic pay cut that Congress has stepped in to stop for the past 11 years.

The report shows that the slowdown in Medicare spending growth has been dramatic. Medicare, which covered an estimated 52.3 million people in 2013, spent $582.9 billion last year, with per beneficiary spending essentially unchanged from the previous year. According to an analysis released by the Department of Health and Human Services (HHS) Monday, the annual per capita growth rate from 2000-2008 was 6.3 percent. That growth slowed to 2 percent from 2009 to 2012. In 2013, that rate fell to nearly zero, and, so far in fiscal year 2014, growth in per person Medicare spending is at or below zero.

To read the report, click here.

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