Happy 50th Birthday, Medicare

September 7, 2015

On July 30, 2015, Medicare turned 50. In 1965, before Medicare was passed, nearly half of the elderly in the United States lacked health insurance. Today, just 2% of people over the age of 65 are uninsured.

In fact, approximately 55 million Americans were covered by Medicare in fiscal year 2014 at a cost of $505 billion. That’s a lot of money — and there are those who worry that the high cost of Medicare cannot be sustained.

However, the 2015 report of Medicare’s trustees shows that Medicare costs have levelled off, attributable at least in part to the passage of health care reform, suggesting those fears are unfounded.

One sign of Medicare’s sustainability is that spending has seen slower growth than other forms of insurance. According to Kaiser Family Foundation data, the annual growth rate for total Medicare spending dropped from 9% (2000-2010) to 4.1% (2010-2014).

This growth has been lower than what was projected primarily because of changes in the health system brought about by health care reform. The changes include payment and delivery system reforms that emphasize coordinated care, especially for people with multiple chronic conditions, incentives that reduce the rate of hospital readmissions, and a slowdown in payments to hospitals and private Medicare plans.

In addition to slower growth in spending, the trustees’ report also indicated that Medicare’s solvency has greatly improved since passage of health care reform. Medicare’s Hospital Insurance trust fund, which is one of the two trust funds specifically allocated by the U.S. Treasury to fund Medicare, will have a surplus of about $2 billion in 2015. Trust fund surpluses are expected to continue for another 8 years, or until the year 2023 — and the fund will remain solvent (that is, able to pay 100% of the costs of the hospital insurance coverage that Medicare provides) through 2030.

That’s good news for Medicare-eligible retirees — and for their former employers who have sponsored their health care coverage.

For the full 2015 Medicare trustees’ report, click here.

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