EBRI Issue Brief

The Medicare Program and Its Role in the U.S. Health Care System

Jun 1, 1991 16  pages


  • http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=18
  • In 1990, Medicare accounted for 16 percent of total national health expenditures. Medicare expenditures are estimated to have represented 2.0 percent of GNP in 1990 and are projected to increase to 6.8 percent of GNP in the year 2060.
  • The number of people eligible for Medicare will increase dramatically in the coming decades. In 1989, the percentage of Americans aged 65 and over was 12.5 percent, and this percentage is projected to rise to 22 percent by the year 2030.
  • Of all health insurers, Medicare is the single largest purchaser of hospital and physician care, purchasing approximately 40 percent of hospital care and 20 percent of physician care in 1989.
  • Medicare program Part A expenditures for coverage of hospital care are increasingly exceeding income, leading to a projected insolvency by the year 2006.
  • Medicare's prospective payment system (PPS) has reduced Medicare Part A costs by reducing admissions and lengths of stay for Medicare patients, although it may have increased the growth rate of Part B costs.
  • Growing concern about increases in physician service expenditures, exacerbated by the shift from inpatient to outpatient care caused by the introduction of PPS in Medicare Part A, resulted in a provision of OBRA '89 that changed Medicare's methodology for reimbursing physicians.
  • The majority of Medicare beneficiaries do not rely solely on Medicare for health insurance coverage. They can purchase supplemental Medigap insurance, rely on employer-sponsored health plans, or—for the poorest elderly—gain Medicaid coverage.