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Medicare finances in better shape than thought

Sunday June 2, 2013
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The Medicare Trustees projected the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2026, two years beyond the projection in last year’s report.

Marilyn Tavenner, RN, BSN, MHA, administrator of the Centers for Medicare & Medicaid Services, said the Affordable Care Act has allowed CMS to take "important steps to improve the delivery of care for seniors with Medicare.

"These reforms aim to reduce spending while improving the quality of care, and are an important down payment on solving Medicare’s long term financial issues,” Tavenner said in a news release.

A number of factors have contributed to the improved outlook, including lower-than-expected Part A spending in 2012 and lower projected Medicare Advantage program costs. Recent data from the Medicare Advantage program indicate that certain provisions of the ACA will help reduce the growth of spending in this program by more than was previously projected.

Partially offsetting these lower spending projections are somewhat lower projected levels of tax revenue.

Medicare spending per beneficiary has grown slowly over the past few years and is projected to continue doing so over the next several years, according to CMS. From 2010 to 2012, Medicare spending per beneficiary grew at 1.7% annually, more slowly than the average rate of growth in the Consumer Price Index and substantially slower than the per capita rate of growth in the economy.

Thanks in part to the cost controls implemented in the ACA — primarily slowing payments to hospitals and private insurance plans that contract with Medicare — growth in the overall economy is projected to continue outpacing Medicare spending for the next several years, according to CMS.

The benefits of this slower growth accrue to both taxpayers and beneficiaries. For example, although the Part B premium for 2014 will not be determined until later this year, the preliminary estimate in the report indicates it will remain unchanged from the 2013 premium.

In 2012, Medicare covered 50.7 million people: 42.1 million people ages 65 and older, and 8.5 million people with disabilities. About 27% of these beneficiaries have chosen to enroll in Part C private health plans (Medicare Advantage) that contract with Medicare to deliver Part A and Part B health services. Total expenditures in 2012 were $574.2 billion. Total income was $536.9 billion.

The Medicare Trustees are Treasury Secretary and Managing Trustee Jacob Lew, Health and Human Services Secretary Kathleen Sebelius, Acting Labor Secretary Seth Harris, and Acting Social Security Commissioner Carolyn Colvin. Two other members are public representatives who are appointed by the president and subject to confirmation by the Senate; those two, Charles Blahous III and Robert Reischauer, began serving on Sept. 17, 2010. Tavenner is designated as secretary of the board.

A PDF of the report is available at http://go.cms.gov/N2f9ru.


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