Actuaries warn Medicare costs threaten long-term sustainability

Increases in total Medicare spending threaten the program’s sustainability while increases in Medicare enrollment contribute to those spending increases.

That was among the takeaways from a recent webinar on the future of Medicare presented by the American Academy of Actuaries.

Increased spending on Medicare Part B and on Part D prescription drug coverage will drive Medicare premiums higher over the next decade, said Derek Skoog, chairman of the academy’s Medicare Committee. Part B monthly premiums are projected to rise from $147 in 2024 to $347 by 2034, with Part D monthly premiums projected to increase from $34 to $51.

“This increase could be significant, particularly as most beneficiaries are on a fixed income,” he said. The increase in Part B spending is mainly attributed to more medical services being provided on an outpatient basis.

The 2025 Medicare Trustees Report projected that Medicare expenditures will begin outpacing income after 2027, he said. With 44% of Medicare revenue coming from general tax revenues in 2024, the growing costs of Part B and Part D also increase pressure on the federal budget. General revenue funding for Medicare as a share of total federal revenue is expected to climb from 11% in 2025 to more than 17% in 2055. Total Medicare spending currently makes up about 4% of gross domestic product but that percentage is expected to rise to nearly 9% by 2099.

Increasing the payroll tax as well as increasing Part B and Part D premiums could fix the gap between spending and revenue, he said, but “that will present challenges for retirees and beneficiaries.”

Concerns about prior authorization in Medicare

Prior authorization in Medicare has received public pushback recently and Washington is taking notice, said Carrie Graham, research professor and director of the Medicare Policy Initiative at Georgetown Center on Health Insurance Reform. Federal regulation and proposed legislation are aimed at reforming prior authorization.

The most recent regulation from the Centers for Medicare and Medicaid Services is a final rule to take effect in 2026 that would ensure health care providers receive notice of the insurer’s coverage determination. The rule also would ensure that Medicare Advantage appeals rules apply to prior authorization denials, regardless of whether the decision was made before, during or after the patient received services.

Prior authorization reform has bipartisan support in Congress, Graham said, with two bills recently introduced in the House of Representatives.

The first, H.R. 3514, Improving Seniors’ Timely Access to Care Act, would require Medicare Advantage organizations to establish electronic prior authorization programs. It would establish certain protections for Medicare Advantage enrollees, such as prior authorization consultation requirements. The bill would exclude Part D drugs from prior authorization requirements.

The second bill, H.R. 2433, Reducing Medically Unnecessary Delays in Care Act, would establish board-certified physicians as final decisionmakers for prior authorization requests within their specialty. It also would require Medicare, Medicare Advantage and Part D plans comply with requirements that prior authorization decisions must be based on medical necessity and written clinical criteria. The bill also would remove “not meeting evidence-based standards” as a valid reason for denial when independently developed evidence-based standards do not exist.

The health insurance industry has pledged to voluntarily reform prior authorization, with 50 carriers who are members of AHIP signing the organization’s voluntary pledge that outlines a six-point road map to modernize prior authorization. However, Graham said, questions remain about the depth of the commitments, the enforceability of the pledge and the impact on patients with complex or high-stakes care needs.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].