5 facts from the 2012 Medicare trustees report

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Registered nurse Susan Eager discusses medication with patient Helen Ricci, 96, during a house call in Denver, Colo., on March 26, 2012.

Article Highlights

  • Trustees estimate that Medicare’s costs under current-law assumptions rise to 6% of GDP in 2040 and 6.7% in 2085.

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  • According to Medicare trustees, the average benefit per enrollee in 2011 was $12,042.

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  • Medicare spending represented 3.7 percent of GDP in 2011, or $549.1 billion. Total income was $530 billion.

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The trustees report from the Center for Medicare and Medicaid Services out Monday uses strong language to describe the uncertainty of its predictions in both the short- and long-term for the medical insurance program aimed at America's seniors.

With 48.3 million people covered by Medicare in 2011 -- and baby boomers now  reaching the eligible age of 65 at the rate of 10,000 a day – the latest release states boldly that given uncertainties about the future of current law, broad assumptions about the "unprecedented improvements in health care provider productivity" envisioned by the Affordable Care Act and even technological advances that could make health care more or less costly, "future Medicare costs could be substantially larger than shown in the trustees’ current-law projection."

Under current-law assumptions, the board estimates that Medicare’s costs will rise to 6.0 percent of GDP in 2040 and 6.7 percent in 2085.

“(T)he board recommends that readers interpret the current-law projections as an illustration of the very favorable financial outcomes that would be experienced if the physician fee reductions were implemented and if the productivity adjustments and IPAB (Independent Payment Advisory Board) measures in the Affordable Care Act could be sustained in the long range,” the report reads.

The projections get worse if doctors’ fees aren’t held down and ACA doesn’t cut costs the way proponents hope.

"Growth of this magnitude, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the federal budget," the report reads.

Here's a look at five highlights from the 2012 report:

1)    Medicare will run out of money to pay full benefits in 2024, the same estimate as 2011, when the trustees moved up its prediction by five years from earlier projections.

2)    The average benefit per enrollee in 2011 was $12,042.

3)   The total number of Medicare beneficiaries approximately doubled over the last 35 years, and the trustees expect the total to double again over approximately the next 35 years.

4)    Medicare spending represented 3.7 percent of GDP in 2011, or $549 billion. That's up from 3.6 percent of GDP in 2010, or $523 billion. Total income in 2011 was $530 billion from taxes and interest.

5)   From the 75-year budget perspective, the present value of the additional resources needed to meet unfunded projected expenditures, at current-law levels, is $38.6 trillion. That represents 4.3 percent of the present value of projected GDP, estimated to be $907 trillion, over the same period. In total, by 2085 Medicare expenditures are expected to equal 6.7 percent of GDP.

However, if Congress continues to override the statutory decreases in physician fees and adherence to the ACA cost-saving measures also erodes, then Medicare spending would instead represent roughly 10.3 percent of GDP in 2085.

AEI research assistant Catherine Griffin contributed to this report.

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