Hospital Insurance Trust Fund extended 5 years to 2036
Several factors contributed, including a change correcting the way medical education expenses are accounted for in MA rates.
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It's now projected that the Hospital Insurance Trust Fund will be able to pay 100% of total scheduled benefits until 2036, five years later than reported last year, finds an annual Medicare Trustee report.
At that point, the fund's reserves will become depleted, and continuing program income will be sufficient to pay 89% of total scheduled benefits.
The improvement was due to several factors, including a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates, starting in 2024; higher payroll tax income resulting from the stronger-than-expected economy; and actual 2023 expenditures that were lower than projected last year.
WHAT'S THE IMPACT?
The Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs each year, and, according to this year's findings, both programs continue to face significant financing issues. For Medicare, one of the challenges is physician payments that are not keeping up with what's needed.
Trustees wrote: "Absent a change in the delivery system or level of update by subsequent legislation, the trustees expect access to Medicare-participating physicians to become a significant issue in the long term."
There was variation in the financial health of the disparate funds. The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79% of total scheduled benefits.
The Disability Insurance (DI) Trust Fund will likely be able to pay 100% of total scheduled benefits through at least 2098, the last year of the report's projection period. Last year's report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2097, the last year of that report's projection period.
If the OASI Trust Fund and the DI Trust Fund projections are combined, the resulting projected fund (designated OASDI) would be able to pay 100% of total scheduled benefits until 2035, one year later than reported last year. The fund's reserves would then become depleted, and continuing total fund income would be enough to pay 83% of scheduled benefits.
The two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program, authors said.
The Supplementary 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.
But, while the financing is assured, rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers, the report found.
The change in the projected long-term finances of the SMI Trust Fund varies over the projection period. For Part B, the long-range projections as a percent of GDP are lower than those projected last year, through 2056, and higher thereafter. This change reflects the combined effects of lower projected spending for outpatient hospital and home-health agency services and revised GDP projections. For Part D, the expenditure share of GDP is projected to be higher than last year early in the projection period and to continue to vary, but become more similar to last year's estimates later in the projection period.
These changes largely reflect revisions to drug utilization, enrollment and GDP projections, authors said.
THE LARGER TREND
Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. While stopping short of specifics, authors said taking action sooner, rather than later, will allow consideration of a broader range of solutions, and provide more time to phase in changes so that the public has adequate time to prepare.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
