Report: Medicare Part A Trust Fund at ‘End of the Road?’

WASHINGTON — Medicare’s Part A hospital trust fund assets
will run out in 2017, two years earlier than previously projected,
according to a May 12 report from the program’s trustees.

According to the report, the new date reflects lower projected
payroll tax income as a result of the recession. Total income to
the trust fund in 2009 is estimated to fall short of expenditures
by $20 billion.

Total Medicare expenditures were $468 billion in 2008 and are
expected to increase in future years at a faster pace than either
workers’ earnings or the economy overall, the report said. As a
percentage of GDP, expenditures are projected to increase from 3.2
percent in 2008 to 11.4 percent by 2083. What’s more, bringing the
massive program back into actuarial balance over the next 75 years
would take a 134 percent increase in the payroll tax or a 53
percent reduction in outlays, or a combination of those
measures.

The report found that Medicare Part B (including physicians and
HME) and Part D (prescription drugs) are projected to remain
adequately funded indefinitely because current law requires
financing to meet projected costs. “Such financing, however, would
have to increase rapidly to match expected expenditure growth under
current law,” the trustees said.

According to Obama administration officials, rapidly rising
health care costs are the cause of Medicare’s financial woes and
illustrate the need for comprehensive health reform
legislation.

HHS Secretary Kathleen Sebelius stressed reform at a briefing
covering the report. “We think Medicare can be an innovator and
actually lead the way on changing the cost projections which are
crushing businesses, governments and families,” she said.

Senate Finance Committee Chairman Max Baucus, D-Mont., said the
report illustrates the connection between an economic recovery and
Medicare reform. “There is a direct connection between the rising
cost of health care and the long-term stability of the Medicare
program, and this report underscores the urgency of action on
comprehensive health care reform this year,” Baucus said in a
statement.

But Sen. Charles Grassley, R-Iowa, the committee’s ranking
member, summed up the situation a bit more succinctly. The “message
of the trustees’ report is loud and clear,” he said. “We need to
act now to address Medicare’s fiscal sustainability. Kicking the
can down the road isn’t an option anymore because we’re at the end
of the road.”

Read the 2009 Annual Report of the Boards of Trustees of the
Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds as a PDF.