Last week, the Congressional Budget Office released its 2014 long-term budget outlook, which projects federal debt held by the public will rise during the next 25 years to the highest percentage in the country's history since just after World War II.
The report includes information about federal spending on major healthcare programs, including Medicare. Here are five things to know from the CBO report about the cost of Medicare and the program's financing.
1. This year, net Medicare spending is expected to amount to 3 percent of gross domestic product, a percentage that the CBO projects will rise to 4.6 percent by 2039.
2. The Medicare program is funded through payroll taxes, beneficiaries' premiums and general federal funds, as well as money from other sources, according to the CBO. The proportion of funding that comes from these various sources has changed considerably over time. Medicare payroll taxes, for instance, went from 63 percent of gross federal Medicare spending in 2000 to approximately 37 percent in 2014. During the same time period, the share of Medicare benefits financed by premiums and other offsetting receipts rose from 10 percent to an estimated 13 percent, and the portion financed by general government funds and the remaining funding sources went from 27 percent to 50 percent.
3. In 2039, the CBO expects receipts from payroll taxes will account for 22 percent of gross federal Medicare spending; beneficiaries' premiums and other offsetting receipts will account for 15 percent; and 63 percent will be financed by general funds and remaining funding sources.
4. Medicare Part A benefits are financed through the Hospital Insurance Trust Fund, which is credited with payroll taxes and a small amount of other revenues, according to the CBO. Although projections of future spending under Part A are uncertain because of likely changes over time in the healthcare system, according to the CBO's April 2014 baseline projections, Part A spending is expected to start increasing faster than HI trust fund income after 2024 or so, meaning the trust fund will be exhausted around 2030.
5. Once the HI trust fund is exhausted, total payments to health insurers and providers for Medicare Part A would be limited to the revenues the trust fund receives. According to the CBO, in that scenario, Medicare beneficiaries' access to care "would almost certainly be reduced."
More Articles on Medicare:
Medicare Beneficiaries' Out-of-Pocket Spending: 6 Things to Know
5 Things to Know About UnitedHealth's Cut of Medicare Advantage Providers
CBO Releases Long-Term Budget Outlook: 5 Things to Know About Federal Healthcare Program Spending