A Primer on Medicare Financing

As Congress and the Administration increasingly focus on the nation’s budget deficit, many policy experts and several bipartisan deficit reduction panels have proposed significant changes to Medicare to reduce federal spending and address rising health care costs.

This primer provides an overview of Medicare spending trends, how the program is financed, and factors contributing to the growth in Medicare spending. Medicare now covers 47 million seniors and younger people with disabilities, with total expenditures of $524 billion in fiscal year 2010, representing 15 percent of federal outlays.

It also describes the expected effects of provisions in the 2010 health reform law on future Medicare spending. The primer reviews the financial obligations and out-of-pocket spending for people covered by Medicare, outlines several ways to assess Medicare’s long-term fiscal outlook, and discusses future financing challenges facing the program.

Primer (.pdf)

Previous versions:

Primer – July 2009 (.pdf)

Issue Brief – January 2008 (.pdf)