Forecasting the Fiscal Sustainability of U.S. Medicare: Scenario-Based Projections Through 2035

Abstract

This paper is an analysis on the fiscal sustainability of the U.S. Medicare by considering past spending patterns between the years 2010 and 2023 and in the future to 2035 based on a scenario spanning model by quantifying the patterns of spending. Based on the information provided by the Centers of Medicare and Medicaid Services (CMS), and the Federal Reserve Economic Database, the research incorporates regression analysis, descriptive statistics, and projections of a scenario to determine the dependence of Medicare expenditure, the real GDP, demographics, and medical prices increase.
The findings indicate that the actual Medicare expenditure has been steadily increasing over the years, which is mainly caused by an increased number of the aging population, economic growth and increasing the cost of medical services. Regression models show a good overall explanatory power (R 2 = = 0.98), which proves that these macroeconomic variables together explain most of the changes in Medicare spending. The results of forecasts of the outcome in three alternative scenarios- Baseline, High-Cost, and Low-Cost- show that the real Medicare spending will proceed to increase to become between 850 billion and 1 trillion (in 2010 USD) by 2035. The fiscal footprint of the program will grow to an average of 4.2-5.0% of the real GDP as compared to 3.7 in 2023.
The results highlight the fact that the fiscal course of Medicare presents a sustainability issue in the long term. Unless the policy interventions are directed at cost containment, efficiency improvements, and payment reforms, the Medicare spending will exceed the rate of economic growth, making federal finances strained. The paper suggests reinforcing value-based care programs, improving the price control, and refining the Medicare Advantage compensation to achieve financial balance and healthcare effectiveness.