Health Law Extends Medicare Solvency to 2029, Trustees Say

John Commins, for HealthLeaders Media , August 5, 2010

Projected costs are slightly lower overall than in last year's report, reflecting lower-than-expected costs in 2008-2009, which were partially offset by higher benefits from phasing out the coverage gap.

The report says the largest projected savings under the healthcare reform law comes from lower annual increases in the prices Medicare pays for services by hospitals, skilled nursing facilities, home health agencies, and most other providers. Payment increases will be reduced by the increase in "multifactor" productivity for the economy overall, which is about 1.1% per year.

Other provisions reduce Medicare costs through lower payments to private Medicare Advantage health plans. The tax hike of .9% of earnings above $200,000 for single taxpayers or $250,000 for married couples also directly benefits the Medicare Trust Fund.

Projected costs for Part B are also lower because of the health reform law, the report states. Part B spending now approximates 1.5% of Gross Domestic Product. Last year's Trustees report projected that would increase to 4.5% by the end of the 75-year projection period. However, now, under current law, it is projected to reach only 2.5% of GDP by the end of the trustees' 75-year projection period.

Part B is in financial balance because beneficiary premiums and general revenue financing are reset each year to match the expected costs for the next year.

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