OFFICE OF THE ACTUARY The Financial Status of Medicare July 14, 2014 Paul Spitalnic CMS Chief...
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OFFICE OF THE ACTUARY
The Financial Status of Medicare
July 14, 2014
Paul SpitalnicCMS Chief Actuary
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Agenda
• Current snapshot and evolution of the program• Different views on Medicare Financial Status
– Formal status of trust funds– Relative to other health expenditures– Relative to other federal expenditures
• Q&A
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Medicare enrollment, benefits, and financing
Hospital Insurance (HI)
Supplementary Medical
Insurance (SMI)
Enrollment in CY 2013: Total .......................................... Proportion with services ...........
52 million 22%
Part B: 48 million Part D: 39 million Part B: 87% Part D: 93%
Benefits* ...................................... * Subject to certain
deductible and coinsurance requirements
Inpatient hospital care Skilled nursing care Home health care (post-institutional) Hospice care
Part B:
Physician services Outpatient hospital services Home health care (general) Other services, e.g. Diagnostic tests Medical equipment Ambulance
Part D: Prescription drug benefit
CY 2014 Financing .....................
HI tax on covered earnings:
1.45% payable by employees and employers, each
2.90% payable by self-employed Following elimination of HI contribution base
(effective 1994), HI tax applies to all earnings in covered employment
Tied to worker income in 2013 and later
Revenue from income taxation of OASDI benefits (portion between 50% & 85%)
Part B premiums and general revenue transfers: $104.90 standard monthly premium Tied to beneficiary income in 2007 and later Fees on manufacturers, importers of
brand-name Rx drugs General revenues cover 75% of costs
Part D drug premiums, general revenues, and State transfers: Base premium in 2014 is $32.42; average
premium is about $31; covers 25.5% of standard benefit costs, 15% of total costs
Tied to beneficiary income in 2011 and later State payments on behalf of certain
beneficiaries cover about 10% of costs General revenues cover 75% of costs
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Medicare Sources of Non-Interest Income
as % of GDP
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Medicare Spending by Category
Total Spending = $10.8B(0.76% of GDP)
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Note: In 1991 there was a methodological change affecting Part B.
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Formal Status of Trust Funds
• Evaluate HI separately from SMI
• HI
– Are assets plus projected income adequate to finance anticipated benefit costs?
• SMI
– Part B account financing set annually
– Part D account draws on General Fund of the Treasury on an as needed basis
– No long term solvency issues
– Growing strain on federal budget
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Amount of deficit that would be covered by interest earnings and asset redemptions
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75-year actuarial balance
• Present value of income rate less cost rate
– Rates compare income or costs to taxable payroll
75-year PV 2013 Report 2012 Report
Income rate 3.83% 3.86%
Cost rate 4.94% 5.21%
Actuarial balance -1.11% -1.35%
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QUESTIONS ????