NCPA - National Center for Policy Analysis

Medicare Trustees Reports 2010 and 2009: What a Difference a Year Makes

November 18, 2010

Medicare spending will be cut dramatically in coming years if the new federal health insurance law -- the Patient Protection and Affordable Care Act (ACA) -- is fully implemented.  

What do Medicare spending cuts mean at the individual level?

  • Prior to the new law, Medicare spending per beneficiary in 2010 dollars was expected to rise from $11,000 to just over $13,000 by 2019.
  • Under the new law, Medicare spending per beneficiary is expected to be only $11,571 in 2019.
  • In 10 years, projected per capita Medicare benefits (net of Part B and D premium payments) will be almost $1,700 lower than last year's projections in today's dollars.
  • In 20 years, the average net benefit will be $3,256 lower than last year's projections.

The lower Medicare spending mostly reflects a reduction in payments to health care providers.

  • Medicare payments will fall from an average of 20 percent less than what private insurers paid in 2010 to almost one-third less (68 percent) in 2019, and to only half by 2050.
  • In less than 10 years, Medicare will go from paying 18 percent more than Medicaid today to paying less than Medicaid pays.

This could lead to an increasing number of providers who are unwilling to treat additional Medicare patients and may opt out of the program.

There are ways to restrain the growth of Medicare without the potential for rationing implied by the ACA.  Seniors could be given a fixed sum of money (premium support) to use to purchase private coverage.  The amount could be adjusted for health risks (such as chronic health conditions) and could grow with per capita national income.

Source: Andrew J. Rettenmaier and Thomas R. Saving, "Medicare Trustees Reports 2010 and 2009:  What a Difference a Year Makes," National Center for Policy Analysis, November 18, 2010.

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