How health reform affects current and future retirees

The Patient Protection and Affordable Care Act (ACA) will fundamentally alter US Medicare. If its provisions remain in place, in the long run it will dramatically reduce Medicare spending relative to recent projections. This change will lower the burden for future taxpayers, but it could also reduce access to care for future beneficiaries, say Courtney Collins, an assistant professor of economics at Mercer University, and Andrew J. Rettenmaier, a senior fellow at the National Center for Policy Analysis.

  • The difference the ACA makes in aggregate spending can be calculated by comparing the projections in the 2009 Medicare Trustees Report (which assumes that Medicare spending will largely keep pace with health spending for the country as a whole) with the 2010 report (which reflects the cuts required by the ACA).
  • Over the next 75 years, the ACA reduces total Medicare spending by about 24 per cent.

    The impact of these changes on individuals born in different years can be quantified:
  • In the absence of the ACA, today's new retirees would have received $53,500 in lifetime benefits over and above lifetime taxes and premiums paid.
  • Because of the ACA, however, they will now receive about $20,700 less in net benefits.

    The impact of the ACA will be even greater on younger workers. For example:
  • In the absence of the ACA, individuals who are 45 years old today would have received $44,900 in net benefits at retirement.
  • With the ACA reforms, however, they will pay $11,400 more in lifetime taxes and premiums than they are expected to receive in benefits.
  • Their reduction in net benefits due to the ACA reforms is about $56,000.

    Source: Courtney Collins and Andrew J. Rettenmaier, How Health Reform Affects Current and Future Retirees, National Center for Policy Analysis, May 12, 2011.

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    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 17 May 2011
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