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Medicare's Financial and Political Future: Challenges and Projections Ahead

This analysis discusses the political and financial future of Medicare, highlighting dominant cost issues that impact federal budgeting and public perception. Projections indicate significant changes ahead, with beneficiaries facing high out-of-pocket expenses and accessibility challenges. The report emphasizes the sustainability of Medicare against rising costs and the need for careful management of fiscal responsibilities. Key factors affecting affordability include growth trends in GDP and potential tax increases. The findings are essential for understanding Medicare's evolving landscape.

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Medicare's Financial and Political Future: Challenges and Projections Ahead

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  1. Medicare’s Political & Financial FutureMarilyn MoonAmerican Institutes for ResearchMay 15, 2006National Academy of Social InsuranceUniversity of Minnesota, Humphrey Institute

  2. Cost Issues Dominate • Share of federal budget and view of the public sector • Future projections • Changes can have a major impact but often viewed narrowly

  3. Source: CBO 2005

  4. Source: 2005 OASDI and Medicare Trustees Report

  5. 6.5% 5.6% 5.3% 4.4% 4.0% Source: Medicare Trustees Report, 1997-2000, 2005

  6. No Magic Bullets for Cost or Access • Many Beneficiaries are not well off • Beneficiaries already pay large amount for care • High cost sharing can affect access • Managed care has been problematic for Medicare

  7. Source: Current Population Survey, 2004

  8. Source: American Institutes for Research Calculations Using NHE, CPI, CPS, and Trustees Report, MCBS

  9. Source: Board of Trustees (2005)

  10. *Includes hospital care, physician, and clinical services, durable medical equipment, and other professional services Source: Boccuti and Moon, 2003

  11. Growth in Medicare Spending & Private Health Insurance Premiums per Enrollee for Comparable Benefits

  12. Access to Care • Affordability of benefits over time • “Sustainability” of Medicare

  13. Medicare Liability as a Share of Social Security Benefit (Illustrative of 65 and 85 year olds) Source: Medicare Actuaries 2004 Note: In 2010 and beyond, there is a large increase in liability because drugs become a Medicare Benefit. If all out-of-pocket costs were shown, the share would be higher in earlier years and lower after 2010

  14. Affordability • From 2003 to 2040 • Increase in GDP per worker- 63% • Increase in GDP per worker if take out Medicare burden- 55% • To do this requires tax increase

  15. Hold Line on Spending? • No tax increase approach 42% cut • Growth proportional to income 33% cut

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