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.
