The March of the Boomers: Daily Armies of New Seniors Swell the Medicare Ranks

Timothy Kelley
Senior Contributing Editor

W​e’ve been hearing the figure at least since 2011, when the first baby boomers turned 65 and became eligible for Medicare: Each day now, 10,000 Americans cross that threshold and switch their coverage to the federal program. And unlike the billions and trillions bandied about in our era, 10,000 isn’t impossible to picture. Just two days’ worth of these new enrollees would fill Madison Square Garden.

Every day 10,000 baby boomer turns 65 and become eligible for Medicare.

What does that number mean? For one thing, it affects a flock of other numbers. Take 60 million—the total Medicare enrollment likely to be reached this year. The Kaiser Family Foundation says that comprises 40 million in traditional fee-for-service Medicare and 20 million enrolled in privately managed Medicare Advantage plans. That total was just 54 million in 2015; by 2030, according to MedPAC, it’s projected to reach 80 million. 

In February 2019, when CMS released the annual projections of its Office of the Actuary, Medicare’s influx of boomers was cited as a key factor to explain an expected rise in national health spending from $3.5 trillion in 2017 to $5.9 trillion by 2027, an increase that will make health care’s large slice of GDP even larger, increasing it from 17.9% to 19.4%. Over that decade, the agency projects that health spending’s 5.5% annual growth will outpace that of the GDP (4.7%), led in turn by an expected 7.4% annual growth in Medicare spending. CMS cites two reasons for torrid growth: “sustained strong enrollment as the baby boomers continue to age into the program” and “growth in the use and intensity of covered services that is consistent with the rates observed during Medicare’s long-term history.” 

Baby boomers surge into Medicare

Ranks of the Medicare eligible are expected to balloon till 2029 when the last of the baby boomers turns 65.

Source: MedPAC, Health Care Spending the Medicare Program, A Data Book, June 2019

Does this “use and intensity” mean a too-extravagant Medicare is in need of an overhaul? A February 2019 Urban Institute report says no. CMS data, the report contends, show that enrollment increases are largely responsible for the high rates of spending growth in Medicare and Medicaid over about the last 10 years, and that these programs’ per-capita spending growth was actually below that of private insurance. The report even gave a friendly wink to Medicare for all, noting that the data “may actually provide some support for efforts to expand public programs or borrow some of their cost containment strategies for use in the private sector.”

But there is a but. CMS does project significant increases in per-enrollee spending in the coming years because of rising drug prices and a hotter economy, the Urban Institute report points out, noting that this projection fits with a view that recession and a slow recovery contributed to slow growth in the recent past. 

Still, the report also sounds a hopeful note about future cost control, speculating that aggressive payment programs by Medicare may have reduced revenue flows to providers sufficiently to cause adjustments in cost structures.

Then there’s both an onion and an orchid for MA plans. A recent shift of recipients to such programs has sparked a rise in Medicare administrative costs, according to the Urban Institute. On the plus side, the report says that “some recent evidence on Medicare Advantage suggests that these plans have been successful at lowering costs without sacrificing quality.”

Why is Medicare spending headed north?

Enrollment is increasing at a faster rate than spending per enrollee.

Source: Urban Institute, Slow Growth in Medicare and Medicaid Spending per Enrollee Has Implications for Policy Debates, February 2019

Considering what’s coming, they’ll need to work that magic big-time. A December 2017 Commonwealth Fund report noted a Congressional Budget Office estimate that annual net Medicare spending—that is, “mandatory spending minus income from premiums and other offsetting receipts”—would more than double in the ensuing decade, increasing from $584 billion last year to $1.2 trillion in 2027. It also threw in an expectation that per-enrollee costs would rise “as new tests and treatments with high price tags become available.” The Commonwealth Fund’s point back then was that the giant Republican tax cut then proposed would make an already unsustainable situation even worse. “The tax bill aside,” warned the foundation, “Medicare is not adequately funded.” 

Indeed, those daily grey armies are helping to push the program rapidly into the red. MedPAC has projected that by 2027 just 2.5 working-age Americans will be striving to pay the tab for each Medicare beneficiary, compared with 4.5 in the ’70s. Little wonder, then, that projections show that Medicare’s hospital insurance trust fund will be insolvent by 2026. We’ve seen this movie before, of course; previous looming insolvencies have prodded Congress into last-minute action with payroll tax hikes or other adjustments. But this time the challenge may be tougher.

You know things are dire when people start publicly criticizing themselves. “I don’t think we’ve taken enough bold steps to move this curve,” said MedPAC Commissioner Warner Thomas of New Orleans’ Ochsner Health System about his commission in September, according to published reports. 

One of Thomas’s fellow commissioners, Brian DeBusk of Powell, Tenn.-based DeRoyal Industries, suggested possible solutions by way of a cheery metaphor. He likened fee-for-service Medicare to an automobile on which extensive tinkering had yet to accomplish repair. “Ultimately it’s going to take a new car,” he said. “Maybe it’s innovation on the Medicare Advantage side, maybe it’s a next-generation ACO, or maybe it’s one of the new contracting models.”

Whatever the response of government or the market, the 10,000-a-day influx of new Medicare recipients isn’t scheduled to abate till 2029, when those born in 1964 bring up the rear of the baby boomers reaching age 65. Till then these folks are going to keep coming, and chances are—they’re the Woodstock-era kids, remember?—they won’t come quietly.

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