What are Medicare's Future Financing Challenges? -

Friday, March 19, 2010

What are Medicare's Future Financing Challenges?

A Reminder of How Medicare Works in Three Weekly Installments

The Kaiser Family Foundation has a recent report “Medicare a Primer 2010,” which explains the Medicare program in terms that lay people can understand. It highlights key elements of the Medicare program, which now provides health coverage to 47 million people (people age 65 and older and younger adults with permanent disabilities.) Medicare is an estimated 12 percent of the federal budget and 20 percent of total national health expenditures. It is often a significant part of discussions about how to moderate the growth of both federal spending and health care spending in the U.S. The Kaiser report looks at the characteristics of the Medicare population, what benefits are covered, how much people with Medicare pay for their benefits and the program’s overall costs and future financing challenges.

This short article highlights (1) What is Medicare?, (2) Who is Eligible? and (3) Medicare’s Future Financing Challenges.

MEDICARE'S FUTURE FINANCING CHALLENGES? Taken from pages 18 and 19 of the Kaiser Family Foundation “Medicare a Primer 2010.”.

Source: Kaiser Family Foundation (February 2010)

Read the primer: http://www.kff.org/medicare/7615.cfm

WHAT ARE MEDICARE’S FUTURE FINANCING CHALLENGES?

Looking to the future, Medicare is expected to face significant financing challenges due to increasing health care costs, the aging of the U.S. population, the declining ratio of workers to beneficiaries, and various economic factors.

In light of the recent economic downturn and pressures to reduce the federal budget deficit, policymakers are likely to turn their attention to ways to reduce federal spending on entitlement programs, including Medicare, Medicaid, and Social Security. Over the long term, several factors – including rising health care costs, an aging population, a decline in the number of workers per beneficiary, and increasing life expectancy – will present fiscal challenges for Medicare. From 2010 to 2030, the number of people on Medicare is projected to rise from 46 million to 79 million, while the ratio of workers per beneficiary is expected to decline from 3.7 to 2.4.

Sustained increases in health care costs are placing upward fiscal pressure on Medicare, as for other payers. Annual growth in Medicare spending is largely influenced by the same factors that affect health spending in general: increasing prices of health care services, increasing volume and utilization of services, and new technologies. Moving forward, system-wide efforts to curtail overall health care costs would help to improve Medicare’s financial outlook.

Ensuring Medicare’s financial stability over the long term is a pressing challenge for policymakers. Medicare provides essential coverage for 47 million beneficiaries, many of whom have multiple chronic conditions and significant health needs. Securing access to affordable health care for seniors and people with disabilities while addressing Medicare’s fiscal pressures is a high priority for the future.