Medicare Trustees Report Shows Continued Slow Cost Growth

CMS News

FOR IMMEDIATE RELEASE
June 22, 2016

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Medicare Trustees Report Shows Continued Slow Cost Growth

Today, the Medicare Trustees projected that the trust fund financing Medicare’s hospital insurance coverage will remain fully funded until 2028, 11 years longer than they projected in 2009 before the passage of the Affordable Care Act.  

“Per-Medicare beneficiary cost growth continues to be exceptionally low,” said Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services (CMS). “For more than five decades, Medicare has provided financial security and accessible health care to millions. With growing numbers of Americans relying on Medicare, it’s our job to continue the hard work to strengthen Medicare and the health care system as a whole.” 

Per-enrollee Medicare spending growth has been low, averaging 1.4 percent over the last five years, slower than GDP per capita (2.9 percent) and overall health expenditures per capita (3.4 percent). And over the next decade, per-enrollee Medicare spending growth (4.3 percent) is expected to continue to be lower than the growth in overall per capita national health expenditures (4.9 percent). Total Medicare spending is projected at a faster 6.9 percent average annual rate over the next decade, reflecting continued enrollment growth driven by the growth of the over-65 population.  

The Medicare Trustees did highlight an area of spending growth, however, noting that that growth in the costs of prescription drugs paid by Medicare continue to exceed growth in other Medicare costs and overall health expenditures. Medicare Part D expenditures per enrollee are estimated to increase by an average of 5.8 percent annually through 2025, nearly 50 percent higher than the estimated increase in GDP per capita (3.9 percent) and higher than the combined per-enrollee growth rate for Medicare Part A and B (4.0 percent). The report found that these costs are trending higher than previously predicted, particularly for specialty drugs. A prior Department of Health and Human Services report also provided a detailed analysis of high cost prescription drug spending trends.  

Based on early data showing the potential for a small Social Security cost of living adjustment, the Trustees Report projects that Medicare’s “hold harmless” protection will be triggered again this year. This would result in a small increase in Part B premiums for about 70 percent of Medicare beneficiaries, with increases in Part B costs spread over the remaining 30 percent, which includes individuals enrolling in Part B for the first time in 2017, those that do not receive a Social Security benefit or who are directly billed for their premium, Medicare and Medicaid dual-eligible beneficiaries, and current enrollees who pay an income related higher premium.   

However, this a projection based on preliminary data. The final Social Security cost of living adjustment will be announced in the fall based on updated data. The 2017 Medicare Part B premiums, which typically differs from these projections, will be announced later in the year. 

The Medicare Trustees are: Health and Human Services Secretary, Sylvia M. Burwell; Treasury Secretary and Managing Trustee, Jacob Lew; Labor Secretary, Thomas Perez; and Acting Social Security Commissioner, Carolyn Colvin. CMS Acting Administrator Andy Slavitt is the secretary of the board. 

The report is available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html