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Medicare Hospital Insurance Trust Fund will run out money in 7 years, trustees say

Part D drug spending projections are lower than last year because of slower price growth and a trend of higher manufacturer rebates.

Susan Morse, Senior Editor

The Hospital Insurance Trust Fund will run out of money in seven years, the Medicare Board of Trustees said in its annual report.

This year's report found that the HI Trust Fund will be able to pay full benefits until 2026, the same as what was predicted in last year's report. 

The trustees oversee Medicare's two separate trust funds, the Hospital Insurance (HI) Trust Fund, which funds Medicare Part A, and the Supplementary Medical Insurance (SMI) Trust Fund, which funds Medicare Part B and D.

WHY THIS MATTERS

The trustees have determined that the fund for hospitalization coverage is not adequately financed over the next 10 years. Income going in is projected to be lower due to a decrease in payroll taxes and income from the taxation of Social Security benefits. Expenditures are also projected to be slightly higher.

With Medicare for All an election issue in 2020, Centers for Medicare and Medicaid Services Administrator Seema Verma used the report to point out that current funds can't cover the 60 million seniors and disabled beneficiaries who currently count on Medicare for healthcare coverage, let alone all Americans.

"At a time when some are calling for a complete government takeover of the American healthcare system, the Medicare Trustees have delivered a dose of reality in reminding us that the program's main trust fund for hospital services can only pay full benefits for seven more years," Verma said by statement.

WHAT ELSE YOU NEED TO KNOW

The SMI Trust Fund, which covers Medicare Part B and D for outpatient services, home health and prescription drugs, is expected to be adequately financed in all future years because premium income and general revenue income are reset annually to cover expected costs and ensure a reserve for Part B costs.

However, the aging population and rising healthcare costs are causing SMI projected costs to grow steadily from 2.1 percent of gross domestic product in 2018 to approximately 3.7 percent of GDP in 2038.

Part D drug spending projections are lower than in last year's report because of slower price growth and a continuing trend of higher manufacturer rebates.

The trustees project that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.7 percent of GDP in 2018 to 5.9 percent of GDP by 2038, and then increase gradually to about 6.5 percent of GDP by 2093. The faster rate of growth in Medicare spending as compared to growth in GDP is attributable to faster Medicare population growth and increases in the volume and intensity of healthcare services.

TREND

In June 2018, the report projected HI would run out of money by 2026, three years earlier than was projected in 2017.

President Donald Trump's Fiscal Year 2020 budget, if enacted, would  strengthen the solvency of the Medicare program, CMS said. CMS has introduced a number of initiatives such as price transparency and has proposed and finalized rules to increase competition. In particular, CMS is increasing choice in Medicare Advantage and adding supplemental benefits to the program, such as for telehealth services.

An estimated 36 percent of all Medicare enrollees are in a private Medicare Advantage plan, the report said.

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. Verma is the secretary of the board.

ON THE RECORD

"If we do not take the fiscal crisis in Medicare seriously, we will jeopardize access to healthcare for millions of seniors," Verma said.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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