Latest Medicare Trustee Report Warns of Insolvency in Seven Years

The Medicare Hospital Insurance Trust Fund will have sufficient funds to pay full benefits until 2026, according to the latest annual report from the Medicare Board of Trustees. That’s unchanged from last year’s report, which projected that the Medicare trust fund would become insolvent three years earlier than they previously expected – in part because of less than anticipated revenue.

According to the Centers for Medicare & Medicaid (CMS), The Medicare Program is the second-largest social insurance program in the U.S., with 59.9 million beneficiaries and last year had total expenditures of $741 billion. The Medicare Trustees report annually to the Congress on the financial operations and actuarial status of the program.

Beginning in 2002, there is one combined report discussing both the Hospital Insurance program (Medicare Part A) and the Supplementary Medical Insurance program (Medicare Part B and Prescription Drug Coverage). The Office of the Actuary in the Centers for Medicare & Medicaid Services (CMS) prepares the report under the direction of the Boards.

The Findings…

The HI Fund, known as Medicare Part A, helps pay for inpatient hospital services, hospice care, and skilled nursing facility and home health services following hospital stays. The Trustee’s report, released on April 22, 2019, projects that Medicare expenditures will grow from 3.7 percent of gross domestic product in 2018 to 6.5 percent by 2093, due to faster growth in the Medicare population and increases in the volume and intensity of health care services.

The Supplementary Medical Insurance Trust Fund, which helps pay for physician, outpatient hospital, home health, and others services for beneficiaries enrolled in Medicare Part B and prescription drug coverage under Part D, is expected to be adequately financed because income from premiums and general revenue are reset each year to cover expected costs.

The Medicare Trustees projected program costs will grow from approximately 3.7 percent of GDP in 2017 to 5.8 percent of GDP by 2038,  and will increase gradually thereafter to about 6.2 percent of GDP by 2092.

“At a time when some are calling for a complete government takeover of the American health care system, the Medicare Trustees have delivered a dose of reality reminding us that the program’s main trust fund for hospital services can only pay full benefit’s for more than seven years,” says CMS Administrator Seema Verma in a statement. “If we do not take the fiscal crisis in Medicare seriously, we will jeopardize access to health care for millions of seniors,” adds Verma

Calls to Fix the Medicare Program

With the release of the Medicare Trustee’s 249-page report, AHA President and CEO Rick Pollack issued a statement saying, “America’s hospitals and health systems remain concerned by the Medicare Trustees Report’s projection that the hospital trust fund will be depleted by 2026 due in part to more people needing care as over 10,000 Baby Boomers turn 65 every single day. The life of the trust fund is influenced by a variety of economic factors as well.

Pollack stated, “It is important to note these estimates only address Part A of the Medicare program, which has become a smaller proportion of overall Medicare spending as the delivery system changes. Given that the projection remains unchanged from a year ago, we continue to urge Congress to shore up the long-term viability of the trust fund. Solutions to address this problem must include tackling the skyrocketing costs of drugs for hospitals, which will continue to grow at an increasingly fast rate in coming years.”

Pollack calls on policymakers to make structural reforms to the program that will have a real long-term impact, specifically additional means testing for higher income beneficiaries, raising Medicare’s eligibility age to be consistent with the Social Security program.  He also urges phasing in adjustments to the FICA contributions that fund the program, reducing regulatory burden and finally to speed up delivery system reforms that better coordinate patient care, especially for the chronically ill patients.

“Hospitals and health systems have been working to keep cost growth down while simultaneously providing the best quality health care for all patients. We stand ready to work with policymakers and other stakeholders to continue to ensure Medicare is there for future generations,” says Pollack.

The Medicare Trustees are: Health and Human Services Secretary, Alex M. Azar; Treasury Secretary and Managing Trustee, Steven Mnuchin; Labor Secretary, Alexander Acosta, and Acting Social Security Commissioner, Nancy A. Berryhill. CMS Administrator Seema Verma is the secretary of the board.

The report is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html.