Medicare, the federal health insurance program for 57 million people ages 65 and over and people with permanent disabilities, helps to pay for hospital and physician visits, prescription drugs, and other acute and post-acute care services. In 2015, spending on Medicare accounted for 15% of the federal budget. Medicare plays a major role in the health care system, accounting for 20% of total national health spending in 2014, 29% of spending on retail sales of prescription drugs, 26% of spending on hospital care, and 23% of spending on physician services. This issue brief includes the most recent historical and projected Medicare spending data from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary (OACT), the 2016 annual report of the Boards of Medicare Trustees and the 2016 Medicare baseline and projections from the Congressional Budget Office (CBO). Medicare benefit payments totaled $632 billion in 2015; just under one-fourth was for hospital inpatient services (23%), 12% for the Part D drug benefit, and 11% for physician services. More than one-fourth of benefit spending (27%) was for Medicare Advantage private health plans covering all Part A and Part B benefits; in 2016, 31% of Medicare beneficiaries are enrolled in Medicare Advantage plans. Both in the aggregate and on a per capita basis, Medicare spending growth has slowed in recent years. While spending is expected to continue to grow more slowly in the future compared to historical trends, there are signs that spending growth could increase at a faster rate than in recent years, in part due to rising prescription drug spending, growing enrollment in Medicare, increases in provider payments, and higher growth in input prices for medical care. Net Medicare spending is projected to grow modestly as a share of the federal budget and the nation's economy in the next ten years.
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