Addressing Health Care Cost Growth in Medicare: A Framework
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©2015 American Academy of Actuaries. All Rights Reserved. 1850 M Street NW, Suite 300, Washington, DC 20036 Tel 202 223 8196, Fax 202 872 1948 www.actuary.org Mary Downs, Executive Director David J. Nolan, Director of Communications Craig Hanna, Director of Public Policy Cori Uccello, Senior Health Fellow Heather Jerbi, Assistant Director of Public Policy Addressing Health Care Cost Growth in Medicare: A Framework The federal Medicare program provides health insurance to most Americans aged 65 and over and to individuals under age 65 who have long-term disabilities. Medicare is a vital source of health coverage for millions of Americans, but it currently faces serious midand long-term financing challenges. Both the number of Americans enrolled in Medicare and the cost per enrollee are increasing. Even though health care cost growth has slowed in recent years, and this phenomenon is not certain going forward, long-term challenges remain. Rising health care costs per beneficiary for Medicare is compounded by more enrollees due to the aging of the population and the retirement of the baby boomer generation. Medicare’s current financing will not sustain the program for the long term, and over time it will place increasing financial demands on employers, workers, beneficiaries, and the federal budget. This pressure on the federal budget created by health care costs taking up an increasing portion can only worsen the fiscal challenges facing policymakers seeking to achieve a balanced federal budget. This brief addresses a significant challenge facing Medicare— health care cost growth—by providing a framework for understanding and evaluating the primary options available for controlling costs and outlining a number of options to reform Medicare and the potential effects of those options on cost growth, care quality, and access to care. ISSUE BRIEF JUNE 2015
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