Medicare: Future - World Health Systems Facts

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“For each of Parts A, B, and D, the assumed cost growth rates for years 11 through 25 of the projection period (adjusted to reflect discontinuities in yearly payment policies) are set by interpolating between the rate at the end of the short-range projection period and the rate at the start of the last 50 years of the long-range period described above. The 2016–2017 Medicare Technical Review Panel concluded that both the current length of the transition period and the current approach to the transition are reasonable, and they recommended that the Trustees continue to use the same approach to transition between short-range and long-range projections for both HI and SMI.¹³

“The basis for the Medicare cost growth rate assumptions, described above, has been chosen primarily to incorporate the productivity adjustments and the physician payment structure in a relatively simple, straightforward manner and with the assumption that these elements of current law will operate in all future years as specified. The Trustees use this approach in part due to the uncertainty associated with these provisions and in part due to the difficulty of modeling such consequences as access to care, health status, and utilization if these provisions of current law do not operate as intended.¹⁴ They have incorporated the effects of changes in payment mechanisms, delivery systems, and other aspects of health care that have been implemented recently, including modest savings from accountable care organizations. However, they have not considered the possible effects of future changes that could arise in response to the payment limitations or future innovative payment models, nor have they taken into account the potential effects of sustained slower payment increases on provider participation, beneficiary access to care, quality of services, and other factors.¹⁵“

Source: The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, June 6, 2024.

“As the preceding discussion explains, and as the substantial differences between current-law and illustrative alternative projections demonstrate, Medicare’s actual future costs are highly uncertain for reasons apart from the inherent challenges in projecting health care cost growth over time. The Board recommends that readers interpret the current-law estimates in the report as the outcomes that would be experienced under the Trustees’ economic and demographic assumptions if the required cost-reduction provisions can be sustained in the long range.”

“Future Medicare expenditures will depend on a number of factors, including the size and composition of the population eligible for benefits, changes in the volume and intensity of services, and increases in the price per service. Future HI trust fund income will depend on the size of the covered work force and the level of workers’ earnings, and future SMI trust fund income will depend on projected program costs. These factors will depend in turn upon future birth rates, death rates, labor force participation rates, wage increases, and many other economic and demographic factors affecting Medicare.”

“After combining the rates of growth from the four long-range assumptions, the weighted average cost growth rate for Part B is 3.9 percent in 2048, or GDP plus 0.2 percent, declining to 3.6 percent by 2098, or GDP minus 0.1 percent. When Parts A, B, and D are combined, the weighted average cost growth rate for Medicare is 3.9 percent, or GDP plus 0.2 percent in 2048, declining to 3.6 percent, or GDP minus 0.1 percent by 2098.

“In addition, these cost growth rates must be modified to account for demographic impacts, which reflect the changing distribution of the Medicare population by age, sex, and time-to-death.¹² Those who are closer to death have higher health spending, regardless of age. The Trustees assume that as mortality rates for Medicare beneficiaries continue to improve in the future, a smaller portion of the population will be closer to death at a given age, which somewhat offsets the effect of individuals getting older and spending more on health care. This is particularly the case for Part A services—such as inpatient hospital, skilled nursing, and home health services—for which the distribution of spending is more concentrated in the period right before death. For Part B services and Part D, the incorporation of the time-to-death adjustment has a smaller effect.”

Medicare: Future - US Healthcare - National Policies - World Health Systems Facts

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Page last updated March 18, 2025 by Doug McVay, Editor.