Medicare Savings by the Numbers

Improvements to Medicare Under the Affordable Care Act

SOURCE: AP/Gerald Herbert

Sen. Michael Bennet (D-CO), second from left, gestures during a news conference on Capitol Hill in Washington. Affordable Care Act provisions specifically affecting Medicare should significantly improve Medicare’s medium-term fiscal position.

October 6, 2010

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The Patient Protection and Affordable Care Act, or ACA, includes changes in the Medicare program that greatly improve its medium-range fiscal outlook. Medicare currently provides health insurance to 46 million elderly and disabled Americans.

ACA’s changes in Medicare are expected to reduce the federal deficit by about $525 billion from 2010 to 2019, according to Congressional Budget Office estimates. In addition, Medicare’s share of the gross domestic product will gradually decrease over time as a result of ACA provisions.

How exactly will these savings work? Let’s take a look at some of the numbers below.

12: The number of years by which the solvency of the Hospital Insurance trust fund is extended under ACA provisions. This fund covers Medicare Part A benefits, which include inpatient hospital services and some long-term care.

7.5 percent: The portion of baseline Medicare spending that will be saved from 2011 to 2019. Over this period, baseline Medicare spending would cost almost $5.7 trillion. Net spending reductions over the same period, however, will equal $427 billion.

$424.4 billion: The amount of federal deficit reduction from 2010 to 2019 due to changes in Medicare coverage and payment rules under ACA. These include limits on annual rate increases for hospitals and other health care providers.

$100.4 billion: The amount of federal deficit reduction from 2010 to 2019 due to new revenue sources for the Medicare trust funds under ACA. These include changes in the Medicare payroll taxes paid by high-income earners and new fees for drug manufacturers and importers.

24 percent: The decrease in Medicare’s share of GDP under ACA provisions. Before the passage of comprehensive health care reform, the portion of GDP assumed by total Medicare spending in 2035 would have been 7.2 percent. With ACA provisions, however, this portion decreases to 5.5 percent.

See also:

• Adding Up the Numbers by Mark Merlis