Created in 1965, Medicare serves as the primary means of health care coverage for America’s seniors as well as disabled individuals.
Medicare provides health care coverage to approximately 63 million people. In 2020, approximately 38 million were in traditional fee-for-service Medicare and 25 million were enrolled in Medicare Advantage and other health plans. The U.S. Census Bureau has estimated that by 2030, just over one in five Americans will be aged 65 or older — over 75 million Americans.
Medicare is the largest single purchaser of health care in the United States, and hospitals represent the largest component of Medicare spending — $316 billion in 2019, according to the Office of the Actuary within the Centers for Medicare and Medicaid Services, which manages the Medicare and Medicaid programs.
The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare policy, tracks the costs and payments of Medicare, assessing the margin between the two. MedPAC has documented that the cost of care hospitals provide to Medicare beneficiaries has exceeded Medicare payments since 2003, creating what is known as a negative Medicare margin. MedPAC reported that the Medicare hospital margin in 2019 was -8.7%
A negative Medicare margin trend is unsustainable, especially in light of the changing demographics in America, which will generate a substantial surge in American senior citizens. Americans who reach 65 years of age expect and deserve access to the hospital care they need through Medicare.
It is imperative that Medicare payment policy enable hospitals to keep pace with the increasing demands of the rapidly growing population of seniors, as well as disabled Americans, who rely on the Medicare program.
Sources: MedPAC, OACT, CMS.