Slideshow on the why Medicare, our country's health insurance program for people age 65 or older, needs to be reformed.

1. The number WORKERS PER MEDICARE BENEFICIARY
of workers
4.6
Medicare at Risk
per Medicare Seniors receive more in Medicare benefits than they pay in
beneficiary
edicare spending 4.0
Many believe that seniors pay for their own Medicare benefits, but in fact, current workers
2021: $7,989
s falling
finance current enrollee benefits. In addition, most Medicare beneficiaries end up receiving
useholds is rising
hortfall PERCENTAGE OF GDP
3.3 $8,000 than what they paid in to the system.
more
2.8
ederal
%
7%
$400,000
ore of household income than
Workers’6%
contributions to FIGURES ARE FOR BENEFICIARIES $357,000 $357,000 Total Benefits
nding VISUALIZING THE NEED FOR REFORM
Medicare aren’t set aside the
ll continue. Absent reform,
WHO RETIRE AT 65 IN 2011 AND Received
2.3
%
ortfall is the EARNED THE AVERAGE WAGE
orbrings ineconomy-crushing new
either own retirement— Projected
en the $300,000
m their %
5% Total
Federal Deficit $6,000
hey pay program.
s in the for current
spends on
fits. Even 4.1% $238,000 DIFFERENCE
%
4%
2010: $170,000 $188,000 $297,000
eneficiaries. A main cause
realistic
policies in
$200,000
fshortfall
Medicare’s growing
ustained, by %
3% $4,136
RICAN HOUSEHOLD $110,000 $128,000
nsolvency is that the ratio
1 percent of
. 2% 3.3%
$100,000
Paid by
f workers to beneficiariesMedicare
way federal (81%
of total
$119,000 Beneficiary
argeting Shortfall $60,000 $60,000 $60,000
s falling. 1% federal
deficit) $0
stees 2012 Single Male Single Female One-Earner Two-Earner
Budget Office, 0% Couple Couple
2012 2015 2020 2025 2030 2035 2040
1965 Source: C. 2001Steuerle and Richard B. Fisher, “HowFoundation, August 2011.
Chart 2 • Medicare at Risk heritage.org
Eugene
Reforming Our Senior Entitlement2011
Lifetime Benefits and Contributions Point the Way Toward
Programs,” NIHCM 2020 2030
Alyene Senger
Chart 9 • Medicare at Risk heritage.org
ource: Medicare Trustees 2012 report.
March 2013 John W. Fleming
Chart 3 • Medicare at Risk heritage.org
1985 1990 1995 2000 2005 2010 2015 2020

2. Medicare PERCENTAGE OF GDP
spending is 14%
growing faster
than the rest of 12%
the federal
budget 10%
Medicare
Entitlement spending is the All Other
8%
main cause of long-term Non-Interest
runaway federal deficits. Spending
Medicare is the fastest- 6% Social
growing program due to Security
retiring baby boomers and Medicaid,
rising health care costs. %
4% Obamacare
Subsidies
2%
Source: Congressional Budget Office 0%
(Alternative Fiscal Scenario). 2011 2015 2020 2025 2030 2035 2040 2045 2050
Chart 1 • Medicare at Risk heritage.org

3. Medicare shortfall PERCENTAGE OF GDP
is driving federal
%
7%
deficit spending %
6%
The Medicare shortfall is the
difference between the
money the program brings in %
5% Total Projected
and the money it spends on Federal Deficit
health care benefits. Even 4.1%
%
4%
assuming that unrealistic
cost-containment policies in
current law are sustained, by %
3%
2040, Medicare’s shortfall
will account for 81 percent of
the federal deficit. 2% 3.3%
Addressing runaway federal Medicare (81%
deficits requires targeting of total
1%
Shortfall federal
Medicare. deficit)
Sources: Medicare Trustees 2012
report, Congressional Budget Office, 0%
extended baseline. 2012 2015 2020 2025 2030 2035 2040
Chart 2 • Medicare at Risk heritage.org

4. The number WORKERS PER MEDICARE BENEFICIARY
of workers
per Medicare 4.5
beneficiary 4.0
is falling
3.3
Workers’ contributions to 2.8
Medicare aren’t set aside
for their own retirement— 2.3
they pay for current
beneficiaries. A main cause
of Medicare’s growing
insolvency is that the ratio
of workers to beneficiaries
is falling.
1965 2001 2011 2020 2030
Source: Medicare Trustees 2012 report.
Chart 3 • Medicare at Risk heritage.org

5. Longer life expectancy means longer enrollment in Medicare
The average life expectancy in the United States has increased since Medicare was created,
but the program’s eligibility age has remained constant at age 65. As a result, seniors collect
benefits for almost three times as long compared to when the program started.
79.5
0
80 YEARS OF AGE
Average Life Expectancy
5
75
Years
70.2
15 years Enrolled in
Medicare
0
70
5 years
65
Age of Medicare Eligibility (unchanged at 65) Note: Some figures
from 2009
Source: U.S. Census Bureau.
re S e u r a through 2020 have
been extrapolated.
60
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Chart 4 • Medicare at Risk heritage.org

6. In projecting Medicare’s cost, more realistic assumptions
show an even worse outlook
The Medicare trustees are MEDICARE’S TOTAL 75-YEAR Total: $36.9 trillion
required to base their UNFUNDED OBLIGATIONS
$35 TRILLION
projections on current law as
it is written. These
projections rely on $30
Total: $26.9 trillion $20.5 trillion
unrealistic assumptions,
such as Congress allowing $25
staggering provider payment Outpatient
cuts that will harm seniors’ $20 $14.7 trillion and Physician
access to care. The Services
alternative scenario paints a $15
more likely picture of the $9.7 trillion
program’s cost. Either way, $10 $5.3 trillion Hospital
the future is bleak. Insurance
$5
$6.8 trillion Prescription $6.8 trillion
Drugs
Sources: Medicare Trustees 2012 $0
report, CMS Office of the Actuary. Current Law Alternative Scenario
Chart 5 • Medicare at Risk heritage.org

7. The burden of Medicare spending 2021: $7,989
on American households is rising
$8000 $8,000
Medicare is consuming more of household income than
care
ever before, a trend that will continue. Absent reform, the
efore,
situation will soon require either economy-crushing new
ion
$6000 $6,000
taxes or painful benefit cuts in the program.
2010:
$4,136
MEDICARE SPENDING PER AMERICAN HOUSEHOLD
ARE
$4,000
$2,000
1970: $129
$0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Sources: Medicare Trustees 2012 report, U.S. Census Bureau.
Chart 6 • Medicare at Risk heritage.org

8. Medicare benefits are paid for by working Americans
Approximately 88 percent of seniors’ Medicare benefits are funded by taxpayers. Medicare
Part A is mandatory coverage funded by the payroll tax. But Medicare Parts B and D, which
cover outpatient services and prescription drugs, respectively, are voluntary and funded
primarily by general revenue.
40%
41% FUNDING SOURCES OF $549.1 BILLION
36%
SPENT ON MEDICARE IN 2011
$223.3 billion
30%
$195.6 billion
20%
8%
10% $42.5 billion 3% 12%
$19.2 billion $68.5 billion
0%
General Current All Other Drawing Down Medicare
Revenues Workers’ Medicare HI Beneficiary
Payroll Tax Trust Fund Premiums
Contributions
Source: Medicare Trustees 2012 report.
Chart 7 • Medicare at Risk heritage.org

9. Seniors receive more in Medicare benefits than they pay in
Many believe that seniors pay for their own Medicare benefits, but in fact, current workers
finance current enrollee benefits. In addition, most Medicare beneficiaries end up receiving
more than what they paid in to the system.
$400,000
FIGURES ARE FOR BENEFICIARIES $357,000 $357,000 Total Benefits
WHO RETIRE AT 65 IN 2011 AND Received
EARNED THE AVERAGE WAGE
$300,000
$238,000 DIFFERENCE
$188,000 $297,000
$200,000
$170,000
$110,000 $128,000
$100,000
Paid by
$119,000 Beneficiary
$60,000 $60,000 $60,000
$0
Single Male Single Female One-Earner Two-Earner
Couple Couple
Source: C. Eugene Steuerle and Richard B. Fisher, “How Lifetime Benefits and Contributions Point the Way Toward
Reforming Our Senior Entitlement Programs,” NIHCM Foundation, August 2011.
Chart 8 • Medicare at Risk heritage.org

10. Obamacare raids CUTS IN MEDICARE DUE TO OBAMACARE, 2013–2022
Medicare to pay
for other new Hospital services $260 billion
programs Payment rates in
$156 billion
Medicare Advantage
Projected Medicare savings DSH* payments and
from Obamacare don’t other Medicare $145 billion
improve the program. provisions
Instead, they pay for other Home health
new programs created services $66 billion
under the law that aren‘t Skilled nursing
even for seniors. By slashing services $39 billion
reimbursement rates Obamacare cuts
instead of introducing real All other services $33 billion $716 billion
reform, the health law from Medicare
jeopardizes seniors’ access
to providers. Hospice services $17 billion
$0 $50 $100 $150 $200 $250
billion
Source: Congressional Budget Office * Disproportionate Share Hospital, meaning payments that go to hospitals that
report. serve a large number of low-income patients.
Chart 9 • Medicare at Risk heritage.org

11. Cutting provider PHYSICIAN
PAYMENT RATES
100%
of Private
payments to Insurance
Payment
lower Medicare Rates
costs will hurt 80%
access 75%
Ratcheting down Medicare
payments to contain the 58% 58%
program’s cost growth will
limit seniors’ access to care. 50%
Medicaid, the government
health program for the poor, Medicare
already sets provider Medicaid*
26%
payment rates far below 25%
private insurance, creating
similar barriers to care for
enrollees.
0%
2012 2086
Sources: CMS Actuary’s 2012
Illustrative Alternative Scenario. * Average of all states.
Chart 10 • Medicare at Risk heritage.org

12. Seniors face PERCENTAGE OF HOSPITALS, SKILLED NURSING FACILITIES, AND HOME
severe access HEALTH AGENCIES THAT WOULD OPERATE AT A LOSS
45%
problems 40%
because of 40%
Obamacare cuts 35%
Obamacare makes deep
30%
cuts to provider payments
to offset the cost of new 25%
25%
programs that aren’t for
seniors. If these deep cuts
20%
go into effect, many
providers will operate in 15%
15%
the red, making it very
difficult for seniors to
10%
access their services.
5%
Source: Medicare Trustees 2012 0%
report. 2019 2030 2050
Chart 11 • Medicare at Risk heritage.org

13. Small Medicare PROJECTED MEDICARE SAVINGS DUE TO HERITAGE’S MEANS TESTING
reforms can make $200
2037: $179 BILLION
a big difference
Keeping Medicare “as we
know it” is unsustainable.
$150
A simple reform such as
raising upper-income
beneficiaries’ premiums
and gradually phasing out
taxpayer subsidies for the $100
wealthiest retirees (about
3 percent) would save 2014:
hundreds of billions of $39 BILLION
dollars.
$50
Source: Calculations by the Heritage
Foundation’s Center for Data
Analysis based on baseline data in
the current projections and data
provided by the Peter G. Peterson $0
Foundation. 2014 2015 2020 2025 2030 2035 2037
Chart 12 • Medicare at Risk heritage.org

14. Heritage plan MEDICARE SPENDING AS PERCENTAGE OF GDP 6%
would rein in 6%
excessive
Medicare
spending Current Law
Heritage’s comprehensive 5%
Medicare reform would
financially preserve 4.5%
5%
Medicare for future
generations while also
improving it as an
insurance program for 4%
America’s seniors.
Heritage Plan
Source: Calculations by the Heritage
Foundation’s Center for Data
Analysis using data from the 3%
Congressional Budget Office’s 2012
Long-Term Budget Outlook. 2013 2015 2020 2025 2030 2035 2037
Chart 13 • Medicare at Risk heritage.org

15. The Health Care Intiative is one of 10 Transformational Initiatives making up The Heritage Foundation’s
Leadership for America campaign. For more products and information related to these Initiatives or to learn
more about the Leadership for American campaign, please visit heritage.org.
The Heritage Foundation is a research and educational institution—a think tank—whose mission is to formu-
late and promote conservative public policies based on the principles of free enterprise, limited government,
individual freedom, traditional American values, and a strong national defense.
As conservatives, we believe the values and ideas that motivated our Founding Fathers are worth conserving.
As policy entrepreneurs, we believe the most effective solutions are consistent with those ideas and values.
214 Massachusetts Avenue, NE • Washington, DC 20002-4999
(202) 546-4400 • heritage.org