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Lower Inpatient Hospital Expenditures Drive Improved Medicare Solvency

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On July 28, the Medicare Board of Trustees released their 2014 report, addressing the financial health of the Medicare program.

According to the report, Medicare will remain solvent until 2030, an increase of four years over last year’s projection of 2026. The improved outlook results from lower-than-expected spending for most Health Insurance (HI) service categories during 2013 (especially for inpatient hospitals), lower utilization assumptions for inpatient hospitals, and lower case mix increase assumptions for skilled nursing facilities (SNFs) and home health agencies.

In addition, Medicare enrollment continues to grow. In 2013, 52.3 million people were covered by Medicare, including 43.5 million aged 65 and older and 8.8 million disabled; about 28 percent of beneficiaries chose to enroll in Part C private health plans. Total benefits paid in 2013 were nearly $566 billion, while income to the Medicare Program totaled $576 billion and expenditures were $583 billion.

The 2014 report indicates that both the ACA and the Budget Control Act of 2011 improved the outlook for Medicare’s HI trust fund. The report’s long-term projections indicate that Medicare will not require general revenue funding. Therefore, unlike the 2013 report, this year’s report does not trigger the “Medicare Funding Warning,” triggered only when a substantial amount of Medicare financing comes from federal general revenues. While the slowed growth in HI spending is positive, much of the recent improvement will ultimately depend on the viability of the various cost-saving measures associated with the ACA.

The Trustees recommend that Congress and the Administration work together to address the depletion of the HI trust fund and the projected growth in HI (Part A) and Supplementary Medical Insurance (SMI) (Parts B and D) expenditures.

View the full 2014 Medicare Trustees Report.

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