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.