Medicare Go-Broke Date Extended to 2036, but Warning Bells Continue Ringing

Healthcare Dive / By Pifer

The Medicare trustees’ new projection for insolvency is five years later than previous forecasts, but budget hawks warned action is still needed to shore up the insurance program’s finances.

Dive Brief:

  • A key trust fund underpinning the massive Medicare program has a new insolvency date: 2036, according to a new report from the Medicare trustees.
  • That’s five years later than the go-broke date in last year’s report, thanks to more workers being paid higher wages causing more revenue to flow into the trust fund’s coffers, along with lower spending on pricey hospital and home health services.
  • Still, looming insolvency absent action in Washington remains a serious source of concern for the longevity of Medicare, which covers almost 67 million senior and disabled Americans, according to budget hawks.

Dive Insight:
 
Dire predictions in the annual Medicare trustees report have varied in the past few years. In 2020, in the early throes of COVID-19, the board predicted the Hospital Insurance Trust Fund fund would run out by 2026. That deadline was pushed back to 2028 and then 2031 in subsequent years’ reports, amid a broader economic rebound and more care shifting to cheaper outpatient settings.
 
Now, the trustees — a group comprised of the Treasury, Labor and HHS secretaries, along with the Social Security commissioner — are forecasting an additional five years of breathing room for Medicare solvency.
 
Along with the healthier economy, that’s in part due to the Inflation Reduction Act passed in 2022, which restrains price growth and allows Medicare to negotiate drug prices for certain Part B and Part D drugs, and should lower government spending in the program overall, according to the report.
 
The Hospital Insurance Trust Fund, which pays hospitals and providers of post-acute services, and also covers some of the cost of private Medicare Advantage plans, is mostly funded by payroll taxes, along with income from premiums.

The HI fund is separate from another trust fund that covers benefits for Medicare Parts B and D, including outpatient services and physician-administered drugs. That Supplemental Medical Insurance trust fund is largely funded by premiums and general revenue that resets each year and doesn’t face the same solvency concerns.
 
In 2023, HI income exceeded spending by $12.2 billion. Surpluses should continue through 2029, followed by deficits until the fund runs out entirely in 2036, according to the report.
At that point, the government won’t be able to pay full benefits for inpatient hospital visits, nursing home stays and home healthcare.
 
Spending is projected to grow substantially in Medicare largely due to demographic changes…

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