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Medicare at Risk: Visualizing the Need for Reform

Medicare at Risk: Visualizing the Need for Reform
Download the full Medicare at Risk | Visualizing the Need for Reform presentation.

Revised and Updated March 22,2013

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Medicare spending is growing faster than the rest of the federal budget

Medicare spending is growing faster than the rest of the federal budget
Entitlement spending is the main cause of long-term runaway federal deficits. Medicare is the fastest- growing program due to retiring baby boomers and rising health care costs.

Medicare shortfall is driving federal deficit spending

Medicare shortfall is driving federal deficit spending
The Medicare shortfall is the difference between the money the program brings in and the money it spends on health care benefits. Even assuming that unrealistic cost-containment policies in current law are sustained, by 2040, Medicare’s shortfall will account for 81 percent of the federal deficit. Addressing runaway federal deficits requires targeting Medicare.

The number of workers per Medicare beneficiary is falling

The number of workers per Medicare beneficiary is falling
Workers’ contributions to Medicare aren’t set aside for their own retirement— they pay for current beneficiaries. A main cause of Medicare’s growing insolvency is that the ratio of workers to beneficiaries is falling.

Longer life expectancy means longer enrollment in Medicare

Longer life expectancy means longer enrollment in Medicare
The average life expectancy in the United States has increased since Medicare was created, but the program’s eligibility age has remained constant at age 65. As a result, seniors collect benefits for almost three times as long compared to when the program started.

In projecting Medicare’s cost, more realistic assumptions show an even worse outlook

In projecting Medicare’s cost, more realistic assumptions show an even worse outlook
The Medicare trustees are required to base their projections on current law as it is written. These projections rely on unrealistic assumptions, such as Congress allowing staggering provider payment cuts that will harm seniors’ access to care. The alternative scenario paints a more likely picture of the program’s cost. Either way, the future is bleak.

The burden of Medicare spending on American households is rising

The burden of Medicare spending on American households is rising
Medicare is consuming more of household income than ever before, a trend that will continue. Absent reform, the situation will soon require either economy-crushing new taxes or painful benefit cuts in the program.

Medicare benefits are paid for by working Americans

Medicare benefits are paid for by working Americans
Approximately 88 percent of seniors’ Medicare benefits are funded by taxpayers. Medicare Part A is mandatory coverage funded by the payroll tax. But Medicare Parts B and D, which cover outpatient services and prescription drugs, respectively, are voluntary and funded primarily by general revenue.

Seniors receive more in Medicare benefits than they pay in

Seniors receive more in Medicare benefits than they pay in
Many believe that seniors pay for their own Medicare benefits, but in fact, current workers finance current enrollee benefits. In addition, most Medicare beneficiaries end up receiving more than what they paid in to the system.

Obamacare raids Medicare to pay for other new programs

Obamacare raids Medicare to pay for other new programs
Projected Medicare savings from Obamacare don’t improve the program. Instead, they pay for other new programs created under the law that aren't even for seniors. By slashing reimbursement rates instead of introducing real reform, the health law jeopardizes seniors’ access to providers.

Cutting provider payments to lower Medicare costs will hurt access

Cutting provider payments to lower Medicare costs will hurt access
Ratcheting down Medicare payments to contain the program’s cost growth will limit seniors’ access to care. Medicaid, the government health program for the poor, already sets provider payment rates far below private insurance, creating similar barriers to care for enrollees.

Seniors face severe access problems because of Obamacare cuts

Seniors face severe access problems because of Obamacare cuts
Obamacare makes deep cuts to provider payments to offset the cost of new programs that aren’t for seniors. If these deep cuts go into effect, many providers will operate in the red, making it very difficult for seniors to access their services.

Small Medicare reforms can make a big difference

Small Medicare reforms can make a big difference
Keeping Medicare “as we know it” is unsustainable. A simple reform such as raising upper-income beneficiaries’ premiums and gradually phasing out taxpayer subsidies for the wealthiest retirees (about 3 percent) would save hundreds of billions of dollars.

Heritage Plan Would Rein in Excessive Medicare Spending

Heritage Plan Would Rein in Excessive Medicare Spending
Heritage’s comprehensive Medicare reform would financially preserve Medicare for future generations while also improving it as an insurance program for America’s seniors.