The US Medicare programme's Hospital Insurance Fund will likely go bust by 2024 and not 2029 as was forecast last year, but without President Obama's Affordable Care Act (ACA) reforms it would have been bankrupt by 2016, the programme's Trustees have reported.
Changes introduced by the ACA will create savings of more than $120 billion to 2016, but depletion of the programme's trust funds by 2024 will mean that Medicare - the US federal health insurance programme for senior citizens and some disabled people - will then have to cut its reimbursements to hospitals and other providers by 10%.
In their annual report, the Trustees find that Medicare's prescription drug benefit - known as Part D - is in financial balance as a result of annual updating of enrollee premiums and benefit payments. They have slightly reduced the forecasts of Part D spending made in their 2010 report, as a result of lower-than-expected costs both for last year and for 2009, together with a reduction in the projected growth in US prescription drug spending for the next 10 years.
Part D expenditures will increase from 0.4% of GDP in 2010 to 0.7% in 2020, rising to about 1.7% by 2085, they forecast.
The five-year change from the Trustees' 2010 forecasts is due to a slowdown in the national economy, which resulted in a decline in tax revenues and higher real projected expenditures, they say, but add that the financial outlook for Medicare is "substantially improved" as a result of changes introduced by the ACA. However, in the long run, much of this improvement depends on the feasibility of the ACA's downward adjustments to future increases in prices paid by the programme for most categories of health care providers, they warn.
Under current law, total Medicare spending is projected to increase in future years "at a somewhat faster pace than either workers' earnings or the economy overall," they say, and forecast that the programme's expenditures as a percentage of Gross Domestic Product (GDP) will rise from 3.6% in 2010 ($535 billion) to 5.5% by 2035, reaching 6.2% by 2085.
However, they add, "if Congress continues to override the statutory decreases in physician fees, and if the reduced price increases for other health services under Medicare become unworkable and do not take effect in the long range, then Medicare spending would instead represent roughly 10.7% of GDP in 2085."
"Growth of this magnitude, if realised, would substantially increase the strain on the nation's workers," the Trustees warn.
- The Medicare programme has two components. Part A - Hospital Insurance (HI) - helps pay for hospital, home health, skilled nursing facility and hospice care for seniors and the disabled.
Supplementary Medical Insurance (SMI) consists of Part B - which helps pay for physician, outpatient hospital, home health and other services for voluntarily-enrolled beneficiaries - and Part D, which provides subsidised access to drug insurance coverage on a voluntary basis for all beneficiaries, plus premium- and cost-sharing subsidies for low-income enrollees.
Part C is an alternative to coverage under Parts A and B which allows beneficiaries to enroll in and receive care from private Medicare Advantage and certain other health insurance plans that contract with the programme.