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Medicare Facts GALEN GUIDE No. 6

FALL 2012

How much does Medicare cost and who gets it? In 2011, Medicare paid more than $550 billion to provide health benefits for nearly 49 million beneficiaries:

41 million senior citizens

8 million disabled people

Medicare is financed partially by premium contributions from seniors and others receiving benefits, but mostly from taxes paid by today’s workers. But the program is $37 trillion in the red over the long term. The program must be changed if it is to be saved.

What is Medicare’s structure? While most private health plans have integrated coverage, Medicare is composed of four parts: PART A helps pay for hospital, home health, hospice care, and other institutional care for the aged and disabled. PART B is an allegedly voluntary program that helps pay for physician, outpatient hospital, home health, and other services. PART C is an alternative to traditional Part A and Part B. Under this option, beneficiaries can choose to enroll in and receive care from private “Medicare Advantage” plans and certain other health insurance plans that contract with Medicare. PART D also is a voluntary program that provides subsidized access to prescription drug coverage for all beneficiaries and premium and cost-sharing subsidies for low-income enrollees.

Medicare Facts

Part D: A success story The program is costing taxpayers 43 percent less today than expected when Congress passed the Medicare Modernization Act in 2003. Part D is a rare government program that is both successful and under-budget. And Part D’s competitive model is saving seniors money as well. The average monthly beneficiary premium for Part D coverage is $30 in 2012, far below the $53 forecast originally, and an increase of only $1 over the 2010 average premium of $29.

“I paid for my Medicare!” Consider this: A couple retiring today with both spouses earning an average wage throughout their careers would have paid $109,000 in total Medicare payroll taxes during their lifetimes. Yet the expected spending by Medicare on the couple will be $343,000. And that is the reason that Medicare must be reformed.

To learn more about the impact of ObamaCare on Medicare, order Why ObamaCare Is Wrong for America by Grace-Marie Turner, Jim Capretta, Tom Miller, and Bob Moffit (Broadside/ HarperCollins, 2011).

Galen Institute is a not-for-profit public policy research organization devoted to promoting an informed debate over free-market ideas to health care reform. Request additional Galen Guides by emailing and access our research online at

Galen Guide #6  

Medicare Facts

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