Rising Medicare costs have been a major contributor to projected long-run budget deficits, and rising out-of-pocket costs have become an increasing challenge to individuals' retirement security. The 2010 Patient Protection and Affordable Care Act (ACA) made substantial changes to Medicare, designed both to improve the program's finances and to reduce the out-of-pocket costs faced by retirees. However, the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS) warns that the assumed impact of the ACA may be overly optimistic and that realized savings may be far more muted. As a result, since 2010, OACT each year has released a set of alternative projections to illustrate Medicare expenditures if current-law payment reductions are not sustained. This brief compares the baseline projections in the annual Medicare Trustees Report with OACT's alternative projections. The discussion proceeds as follows. The first section discusses the ACA changes and the projected decline in Medicare expenditures. The second section examines how the reductions in expenditures translate into lower out-of-pocket spending for beneficiaries. The third section outlines the key differences in assumptions between the Medicare Trustees Report and OACT's alternative projections. The fourth section examines how the two sets of projections have changed over time. The conclusion is that they have been converging, suggesting increasing agreement that the ACA will significantly reduce long-run Medicare costs.
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