Today, Medicare covers 65 million older and disabled Americans. What does that mean for the US budget, national health care spending and the future of Medicare? A new Kaiser Family Foundation interactive, the facts about Medicare spending, takes a deep dive into the 2020 data.
One in five Americans now have Medicare. And, although people with Medicare use three times more health care services than younger people, Medicare represents 20 percent of national health care spending. Traditional Medicare, which covers slightly more than half of the Medicare population is extremely cost-effective, with less than two percent of its budget going towards administrative costs. In sharp contrast, Medicare Advantage plans take 15 percent of their budget for administration and profit.
About one-eighth of the federal budget–$769 billion–covers Medicare costs. In 20 years, those costs have almost quadrupled. And, projections are that Medicare costs will double in the next ten years because the Medicare population is growing, as are health care costs. By 2060, there will be 93 million people with Medicare.
What does Medicare cost per enrollee? Each person with Medicare cost an average of $14,400 in 2020, up from $5,800 in 2000.
Why is Medicare growing so much? People are living longer. There are more people 80 and older, and, by 2060, they will represent one-third of the population over 65. Today, they represent about one-fourth the population over 65. Of note, the percentage of people over 90 will double, from 5 percent of those over 65 today to 10 percent in 2060. (The Kaiser paper does not speak to the high cost of Medicare Advantage, which has already cost Medicare over $100 billion more than traditional Medicare and is projected to cost an additional $600 billion over the next nine years.)
Where is Medicare spending highest? Today, nearly half of all Medicare spending (48 percent) happens under Medicare Part B for outpatient services. Inpatient services under Medicare Part A represent 40 percent of Medicare spending. Prescription drugs represent the remaining 12 percent.
Medicare Advantage spending is growing faster than traditional Medicare, eating into the Medicare Trust Fund. Today, the government spends about four percent more per person in Medicare Advantage than in traditional Medicare.
How much are people with Medicare spending out of pocket? People with Medicare are spending a lot more out of pocket than they used to. Over the last 2o years, out-of-pockets costs have gone from about 15 percent of the average Social Security benefit to 19 percent. Medicare premiums represented 6 percent of people’s average Social Security benefit in 2002; they now represent 10 percent.
Consequently, people with Medicare–most of whom rely heavily on Social Security to make ends meet in retirement–have increasingly less to spend on other necessities.
The Part A Trust Fund, which pays for inpatient care, is projected to stop being able to pay full benefits as of 2026. At that point, it will only be able to cover 91 percent of those benefits, unless Congress steps in, which it has always done.
Here’s more from Just Care:
- Private equity-owned hospice and home health agencies drive up Medicare spending, jeopardize quality of care
- 2022: Medicare out-of-pocket costs
- MedPAC: Traditional Medicare consistently costs less than Medicare Advantage
- Roundup: 2022 Medicare benefits and more
- 2022: Programs that lower your health care costs if you have Medicare
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