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Medicare by the Numbers: The Federal Budget and Spending Cuts

By: 
PFM

The first federal budget was introduced by Alexander Hamilton in 1790.[i] 224 years later, lawmakers recently passed another spending bill – this time, a $1 trillion package that will impact key federal programs like Medicare.

If seniors in 1790 were enrolled in Medicare at today’s rates, the program would have just 680,700 beneficiaries.[ii][iii] But like the budget, the U.S. population has skyrocketed since 1790. Today, Medicare has 54 million beneficiaries,[iv] growing rapidly as 10,000 seniors become eligible each day. [v]

Last week, Congress passed a budget that holds funding levels for CMS, which administers Medicare, constant through next fall.[vi] Medicare currently makes up 14 percent[vii] of federal outlays and is expected to cost over $1 trillion by 2023[viii] as enrollment continues to increase – just 7 years before its projected date of insolvency.[ix]

Medicare is on an unsustainable path. As a result, recent efforts have incorrectly focused on reducing the program’s costs by imposing spending cuts:  

  • In 2010, the Affordable Care Act mandated significant Medicare payment cuts from 2013-2022, including[x]:

o   $260 billion to hospital reimbursements;

o   $156 billion to Medicare Advantage; and

o   $39 billion to skilled nursing services.

  • The following year, the Budget Control Act of 2011 mandated 2 percent across-the-board cuts to Medicare, known as “the sequester,” which totaled $11 billion in 2013. These cuts will total $123 billion by 2021.[xi]

Across-the-board, sweeping cuts are equivalent to a band-aid on a broken leg.  They have the perverse effect of harming programs and services that beneficiaries like and they will not stop the 76 million baby boomers that will age into the program by 2030.[xii] Instead of making haphazard cuts to the program, legislators need to push forward reforms to restructure physician payment and health care delivery.  To become sustainable, Medicare must move away from a fee-for-service system toward one that rewards value over volume. To learn more about our path forward, check out our principles for successful reform.



[ii] This number is approximate and calculated based on the percentage of the U.S. population enrolled in the Medicare program in 2014, multiplied by the U.S. population in 1790.

 

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Date: 
Tuesday, December 16, 2014