Feds predict Medicare Hospital Insurance Trust Fund will run dry by 2031
That's three years later than the prediction from the 2022 report, which projected a 2028 time frame for when the fund would evaporate.
Photo: Halfpoint Images/Getty Images
A number of federal agencies – including the U.S. Department of the Treasury, Departments of Health and Human Services and Labor, the Centers for Medicare and Medicaid Services, and the Social Security Administration – have determined that the Medicare Hospital Insurance Trust Fund will run dry by 2031.
That's three years later than the prediction from the 2022 report, which projected a 2028 time frame for when the fund would evaporate.
The agencies came to this conclusion after a meeting of the Social Security and Medicare Boards of Trustees, which released its annual reports late last week.
Secretary of Treasury Janet L. Yellen said that Social Security and Medicare are "bedrock programs" that older Americans rely on for their retirement security, and that their long-term viability should be preserved.
Acting Secretary of Labor Julie A. Su attributed strong job growth for putting the Trust Funds on a better footing, but said there's still work to do to preserve them.
WHAT'S THE IMPACT?
According to a fact sheet on the reports, the fund's reserves will be depleted in 2031 and continuing program income will be sufficient to pay 89% of total scheduled benefits.
The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100%of total scheduled benefits until 2033, one year earlier than reported last year. At that time, that fund's reserves will become depleted and continuing program income will be sufficient to pay 77% of total scheduled benefits.
The Disability Insurance (DI) Trust Fund is projected to be able to pay all scheduled benefits through at least 2097, the last year of this report's projection period. By comparison, last year's report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2096.
If the OASI Trust Fund and the DI Trust Fund projections are added together, the resulting projected fund (designated OASDI) would be able to pay 100% of total scheduled benefits until 2034, a year earlier than reported last year. When that's depleted, continuing total fund income could pay 80% of scheduled benefits.
The two funds could not actually be combined unless there was 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, the trustees 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 – premiums on enrolled beneficiaries and 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, the reports found.
THE LARGER TREND
Since last year's reports, the projected long-term finances of the OASI and the OASDI Trust Funds worsened due to the trustees revising down expected levels of gross domestic product and labor productivity by about 3% over the projection window. The trustees made this change as they reassessed their expectations for the economy in light of recent developments, including updated data on inflation and U.S. economic output.
Despite the downward revision to economic assumptions, the projected long-term finances of the HI Trust Fund improved since last year's report. The improvement is mainly due to lower projected healthcare spending stemming from updated analyses that use more recent data.
SMI Trust Fund expenditures for Medicare Part B as a share of GDP are also projected to be lower than previously estimated, in part for the same reason. In addition, expenditures on drugs under SMI in Medicare Parts B and D are projected to be markedly lower as a share of GDP due to the impact of provisions of the Inflation Reduction Act, which became law in August 2022.
"Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls," the trustees wrote. "We urge Congress to consider such options for both Medicare and Social Security, like the proposal for Medicare in the President's FY24 Budget."
ON THE RECORD
"Medicare is a key pillar of our healthcare system and a sacred promise that we'll support the generations who came before us and those who come after," said CMS Administrator Chiquita Brooks-LaSure. "Everyone in the Biden-Harris Administration is committed to protecting Medicare, and we look forward to working with Congress to strengthen this vital program serving over 65 million Americans."
"The trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually," said Kilolo Kijakazi, acting commissioner of Social Security. "Social Security will continue to play a critical role in the lives of 67 million beneficiaries and 180 million workers and their families during 2023. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations."
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
