Medicare Trustees issued their annual report on Medicare's financial status on April 23, 2012. According to this year's report, the Hospital Insurance (Part A) Trust Fund has sufficient reserves to pay out the full amount of Medicare Part A benefits until 2024 – the same projection made in last year's report. Should nothing else change, and the Trust Fund reserves be depleted in 2024, the Trust Fund would still receive sufficient income from the payroll taxes and other revenue through which it is funded to pay 87% of anticipated Part A expenses.[1]
As described in previous Alerts, the Trust Fund is a victim of the economy.[2] Health care costs typically rise at a much faster rate than general inflation. This, combined with a high unemployment rate which means that fewer people are working and contributing payroll taxes into the Trust Fund, leads to the changes in the projected solvency of the Trust Fund. Since 1970, the trustees have projected Trust Fund insolvency in as little as 4 years or as much as 28 years.[3] The longest projected solvency period occurred in years in which the country experienced high economic growth and budget surpluses.
In short, contrary to assertions made by some, Medicare is not going "bankrupt" or running out of funds.[4] Medicare does, however, face funding challenges. While changes to the Medicare program pursuant to the Affordable Care Act (ACA) have improved Medicare's cost outlook by extending trust fund solvency by 8 years,[5] more needs to be done to bring down program costs.[6]
[1] 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (April 23, 2012), available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads//tr2012.pdf
[2] See, e.g., Weekly Alert "2011 Medicare Trustees Report" (May 19, 2011), available at: https://www.medicareadvocacy.org/2011/05/19/2011-medicare-trustees-report/
[3] "Trustees Issue Warnings on Medicare But Make No Changes to Solvency Projections" by Marilyn Werber Sarafini and Phil Galewitz, Kaiser Health News (April 23, 2012), available at: http://www.kaiserhealthnews.org/Stories/2012/April/23/medicare-trustees-long-term-forecast.aspx
[4] See, e.g., "Medicare is Not Bankrupt" by Paul N. Van de Water, Center on Budget and Policy Priorities (April 24, 2012), available at: http://www.cbpp.org/cms/index.cfm?fa=view&id=3532
[5]See, e.g., CMS Press Release: "Medicare Stable, But Requires Strengthening" (April 23, 2012), available at: http://www.cms.gov/apps/media/press/release.asp?Counter=4341&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date
[6] For examples of ways to achieve cost-savings to the Medicare program while improving benefits, see, e.g., previous Weekly Alerts, including: including: "Real Solutions For Medicare Solvency" (June 9, 2011), available at https://www.medicareadvocacy.org/hidden/so-what-would-you-do-real-solutions-for-medicare-solvency-and-reducing-the-deficit/; "Real Solutions to Save Medicare Dollars in Skilled Nursing Facilities" (June 30, 2011), available at: https://www.medicareadvocacy.org/2011/06/real-solutions-to-save-medicare-dollars-in-skilled-nursing-facilities/; and "Debunking Medicare Myths: Drug Rebates for Dual Eligibles" (July 21, 2011), available at: https://www.medicareadvocacy.org/2011/07/debunking-medicare-myths-drug-rebates-for-dual-eligibles/.