Medicare Trust Fund Running Short

(April 23, 2019)—One of the two Medicare trust funds is on pace to run out of funds in seven years, according a report released Monday by the Medicare Board of Trustees. The projections align with last year’s forecasts.

Due to the aging population, spending for the Medicare hospital insurance trust fund–which covers Part A and Part C plans–could be depleted by 2026, the report said. Medicare costs are projected to continue to rise during this time.

In 2018, Medicare covered 59.9 million people: 51.2 million people aged 65 and older, and 8.8 million disabled people. About 36% of beneficiaries chose to enroll in Part C private health plans that contract with Medicare to provide Part A and Part B health services.

The report said costs associated with the Medicare Supplementary Medical Insurance (SMI) trust fund, which covers drug costs in Part B and Part D in the program for seniors, are likely to grow steadily from 2.1% of gross domestic product in 2018 to about 3.7% of GDP in 2038.

Medicare Part B primarily covers specialty drugs while Part D covers prescriptions obtained at a pharmacy.

Trustees project that the SMI fund for Part B and Part D will remain adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.

The report has fueled the debate over “Medicare for All” in Washington. Department of Health and Human Services Administrator Alex Azar said that the current 2020 budget plan extends the program for eight years through value-based payment initiatives and efforts to lower the costs of prescription drugs.

“Instead of trying to expand Medicare into a universal entitlement that even covers wealthy Americans of working age, as some have proposed, we need to fulfill Medicare’s promise to our seniors,” Azar said in a statement. 

Seema Verma, administrator for the Centers of Medicare & Medicaid Services said the report delivered a “dose of reality.”

“If we do not take the fiscal crisis in Medicare seriously, we will jeopardize access to health care for millions of seniors,” she added.

The report also projected the Social Security trust fund could be depleted by 2035.

Read the report here.