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Earlier this week, the Medicare Trustees issued their 2019 annual report, which offers projections concerning the fiscal health of the Medicare and Social Security programs.  The Medicare Trustees estimate that the Part A Hospital Trust Fund will be depleted by 2026, unchanged from last year’s projection.

As noted in the Report, income to the Part A Trust Fund “is projected to be lower than last year’s estimates due to lower payroll taxes and lower income from the taxation of Social Security benefits” (p. 6).  Unfortunately, this is due, in part, to the ill-advised GOP tax bill passed in 2017, which reduced both revenue streams. 

Unlike Part A, Parts B and D of Medicare do not face a shortfall.  According to the Report, the combined trust fund for Part B and D “is expected to be adequately financed over the next 10 years and beyond because income from premiums and general revenue for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies” (p. 7).

The good news is that the projected insolvency date for Part A is about eight years later than it would have been without the Affordable Care Act.  The bad news, as noted above, is that date reflects recent, ill-advised laws and policies – including the 2017 tax cut, which is reducing revenue, increased enrollment in and inflated payments to private Medicare Advantage plans, and increased spending, particularly for prescription drugs.

The Trustees’ projection should not be used as an excuse to cut Medicare benefits for older and disabled people. . As demonstrated by the positive impact the Affordable Care Act had on increasing the life-span of the Trust Fund, the problem is fixable without reducing benefits. Instead, the Administration and Congress should negotiate drug prices for the whole Medicare program, stop Medicare Advantage overpayments, and end efforts to repeal and sabotage the Affordable Care Act

An Important Note on Trust Fund Solvency:

Even if the Part A Trust Fund were to be depleted as projected, the program would still be able to pay out approximately 89% of its Medicare benefits (and, if current projections hold, roughly 78% by 2050). While not ideal, this is far from “bankruptcy.”  Further, the date of projected insolvency is an estimate, and could easily change again – as it has many times before.

The Trust Fund largely reflects the health of the economy. At various times since 1970, the trustees have projected Trust Fund insolvency in as few as four years or as many as 28 years.  While the Part A Trust Fund is mostly funded by payroll taxes, as noted above, Medicare Part B is funded by a certain percent of general revenues and premiums, and therefore cannot “go broke.”

In fact, Medicare as a whole is not "going broke."  It could be strengthened with better oversight of private Medicare Advantage plans, smarter prescription drug payment limitations, support for Affordable Care Act provisions, rolling back the over-zealous tax cuts, and other cost-effective planning and policies.

April 25, 2019 – D. Lipschutz

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