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The Medicare Trustees issued their annual report on Medicare's financial status on Friday, May 13, 2011.  According to this year's report, the Hospital Insurance (HI) Trust Fund has sufficient reserves to pay out the full amount of Medicare Part A benefits until 2024. Should nothing else change, and the Trust Fund reserves be depleted in 2024, the HI Trust Fund would still receive sufficient income from the payroll taxes through which it is funded to pay 90 percent of  anticipated Part A expenses.[1]

In 2010, the Trustees reported that, as a result of health care reform, the HI Trust Fund was expected to remain solvent until 2029 – 12 years longer than they had predicted in 2009.  This year's report, though not as favorable, still projects a longer solvency period for the HI Trust Fund than had been reported in 2006 through 2009.  According to the National Academy of Social Insurance (NASI), the projected length of continued solvency for the HI Trust Fund has averaged 13.7 years since 1990, with projections ranging from a high of 28 years in 2001 and 2002 to a low of 4 years in 1997.[2]

The HI Trust Fund is a victim of the economy.  Healthcare costs typically rise at a much faster rate than general inflation.  In 2010, healthcare costs rose almost four times faster than the consumer inflation rate.[3] In addition, the high unemployment rate means that fewer people are working and contributing payroll taxes into the Trust Fund.  Payroll tax contributions were also lower than anticipated because wages are not increasing. As a result, the Trustees had to change some of the assumptions they use about economic growth in projecting the solvency of the Trust Fund.   Note that the longest projected solvency period, 28 years, occurred in years in which the country experienced high economic growth and budget surpluses.



[1] 2011 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (May 13, 2011), available at: https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf.
[2] Sabitha Zainulbhai, Lee Goldberg, Medicare Finances”Findings of the 2011 Trustees Report  (NASI, May 2011), available at: http://www.nasi.org/sites/default/files/research/Medicare_Finances_Findings_of_the_2011_Trustees_Report.pdf.
[3] Standard & Poor's Healthcare Economic Indices, available at: http://www.standardandpoors.com/indices/sp-healthcare-economic-indices/en/us/?indexId=sp-healthcare-economic-indices

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