Every year, the Social Security and Medicare Boards of Trustees release reports on the fiscal health of the Medicare and Social Security programs. On May 6, 2024, the Trustees released their 2024 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 will be able to pay 100 percent of total scheduled benefits until 2036, 5 years later than reported last year. At that point, that fund’s reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits [emphasis added].
- The Supplemental Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources–enrolled beneficiary premiums and the [associated] federal contributions from the Treasury–are automatically adjusted each year to cover costs for the upcoming year. Although the financing is assured, the rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers.
As the Center regularly points out when the Trustees’ report is released (see, e.g. here), 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 89 percent of total scheduled benefits. That means an 11% 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 has noted in the past, 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 Center on Budget and Policy Priorities post (May 7, 2024) discussing the 2024 Trustees report and President Biden’s proposed 2025 budget that would address the fund’s shortfalls.
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 Medicare programmatic spending (see, e.g., this CMA Alert (February 22, 2024).
As the Center noted in a 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. As the MA program puts increasing pressure on Medicare’s finances, this dynamic is getting harder to ignore.
May 9, 2024 – D. Lipschutz