Introduction: The latest annual report from the Centers for Medicare & Medicaid Services shows that, given current trends, the costs of our federal health care programs will grow sharply in coming decades. Those trends are driven by falling fertility, rising life expectancy, exploding health care costs, and a flood of retiring baby boomers. Recent laws have created caps on the potential growth of Medicare costs per beneficiary, and significantly reduced the projected growth of health care costs. However, the degree to which the caps are sustainable is subject to an extraordinary amount of uncertainty, and assuming that the caps can be maintained is likely optimistic.
An excerpt from the annual report:
The financial outlook for the Medicare program is substantially improved as a result of the changes in the Affordable Care Act. In the long range, however, much of this improvement depends on the feasibility of the ACA’s downward adjustments to future increases in Medicare prices for most categories of health care providers. The development and implementation of new models for delivering and paying for health care have the potential to reduce cost growth rates to the level established by the statutory price updates, but specific outcomes cannot be assessed at this time.
…The Affordable Care Act introduced important changes to the Medicare program that are designed to reduce costs, increase revenues, expand the scope of benefits, and encourage the development of new systems of health care delivery that will improve health outcomes and cost efficiency. The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future. The sooner solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations. We believe that prompt action is necessary to address both the exhaustion of the HI trust fund and the anticipated excess growth in HI, SMI Part B, and SMI Part D expenditures.
Read the full report.