Additional Two Years of Solvency Projected, But Attention Still Needed
Every year, the Social Security and Medicare Boards of Trustees release reports on the fiscal health of the Medicare and Social Security programs. On June 2, 2022, the Trustees released their 2022 annual reports: the Medicare Trustees report is available here, and a fact sheet summarizing the reports is available here. As noted in the fact sheet:
- The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits. [emphasis added]
- The Supplementary Medical Insurance (SMI) Trust Fund [which funds Parts B and D of Medicare] is 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. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.
As noted by reporter Michelle Stein at Inside Health Policy (6/2/22), “Medicare trustees […] projected the Part A trust fund would be insolvent in 2028 — two years later than they predicted in the previous report but two years earlier than the Congressional Budget Office’s recent 2030 projection — and attributed a better-than-expected economic recovery, COVID-related deaths among seniors and deferral of other health care visits during the pandemic as partially responsible for their new projection.” Demographics – specifically an aging population – and the rising costs of health care, continue to put significant pressure on Medicare’s financing.
The projected life of the HI trust fund has varied considerably over the years, based on a number of factors, including the health of the economy. Congress has never let the fund become insolvent. What happens if the fund does become insolvent? The fund’s reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits. That means a 10% reduction in what there is to spend on Part A – not a situation we want to get to, but a far cry from “bankruptcy” or “going broke” that many policymakers claim.
Addressing Medicare’s Fiscal Solvency
As the Center for Medicare Advocacy routinely notes, there are various ways to address Medicare’s solvency, by raising revenues, reducing spending, or both. For example, a May 2021 issue brief written by Center for Medicare Advocacy Visiting Scholar Marilyn Moon examines how Medicare has operated over time, how well it is doing at present, and what changes have been used in the past to keep the program financially strong. The brief outlines potential short-term and long-term funding solutions through raising additional revenues. (Also see, e.g., this CMA Alert (Feb. 11, 2021).)
One significant and obvious option, which is ignored by most policymakers, is to look at the Medicare Advantage (MA) program. There is consistent, and growing evidence that the Medicare Advantage program is paid more than traditional Medicare would spend on the same beneficiary, and such spending is growing per person, with significant implications for the Medicare programmatic spending (see, e.g., this CMA Alert (March 31, 2022); also see this CMA Alert (March 18, 2021).
As the Center noted in a recent CMA Alert (March 3, 2022), when it comes to Medicare policy discussions on Capitol Hill, two things are commonly raised:
- Active support for Medicare Advantage (MA), and
- The looming insolvency of the Part A Trust Fund.
Despite the painfully obvious connection between these two, however, they are rarely discussed together. In fact, policymakers in both parties continue to ignore their obligation to address inflated Medicare Advantage payments.
As highlighted in another recent CMA Alert (May 5, 2022), while there is an apparent lack of appetite on either side of the aisle to address MA overpayments, a change in control of Congress could lead to further efforts to bolster the MA program by, among other things, expanding enrollment opportunities into MA and making the MA program the default selection for new enrollees.
As Congress continues to dodge the issue of MA overpayments, they will, at some point, have to turn attention back to trust fund solvency and overall programmatic spending. We urge policymakers, and the public in general, to beware of proposals that paint traditional Medicare as the problem, and Medicare Advantage as the solution. Without significant policy changes, we simply cannot afford this path.
June 9, 2022 – D. Lipschutz