Medicare is the nation's federal health insurance program for people age 65 and older and many younger people with long-term disabilities. In 2020, about 63 million people rely on Medicare for their health coverage. Medicare helps pay for hospital, doctor, and other medical services, as well as for prescription drugs. By many measures, Medicare's financial status improved during the past decade. In large part, this is the result of policy changes in the Affordable Care Act (ACA) of 2010, which contributed to slower spending growth. In 2018, Medicare spending was 20 percent lower than had been projected in 2009, a reduction of $185 billion. Still, while Medicare is not "going broke," the program--like the rest of the health care system--faces long-term financial pressures from rising health care costs, as well as from an aging population. The COVID-19 pandemic will have substantial impacts on the Medicare population and the program. Although its full effects are not yet known, the public health crisis has driven home the essential nature of having access to life-saving health services and the value of Medicare in providing access to care for millions of older Americans and younger individuals with disabilities. To help address long-term financial pressures, Medicare has been developing and testing a variety of new ways to pay for and provide health care that are aimed at both slowing cost growth and improving quality. These innovations involve testing ways of giving hospitals, doctors, and other health care providers financial incentives and new flexibility to change how they deliver care. In this Insight on the Issues, we highlight seven innovations in how health care services are paid for and delivered in traditional Medicare. Among people with Medicare, nearly two-thirds are covered by traditional Medicare (also called original Medicare). In 2019, 37 percent of people with Medicare opted to enroll in private health plans, known as Medicare Advantage plans, for their Medicare coverage, instead of traditional Medicare.5 The focus of this report is on innovations in traditional Medicare; it does not look at innovations in the Medicare Advantage program..
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