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Medicare Trustees Deliver Grim Outlook

Margaret Dick Tocknell, for HealthLeaders Media, May 16, 2011

A weak economy, lower incomes, and higher healthcare costs mean trouble for Medicare’s Hospital Insurance Trust Fund, which is now projected to remain solvent until only 2024, the 2011 Medicare Trustees report shows. That’s five years earlier than the 2010 report estimated.

But the latest report says things could be worse. Without the reforms in the Affordable Care Act, the Medicare HI Trust Fund would expire in just five years—in 2016. So, according to the report, the healthcare reform bill added eight years of solvency to the portion of the Medicare Part A program, which pays for inpatient hospital care, skilled nursing facility care, and home health and hospice care.

The Trustees report has renewed a call for Congressional action to resolve Medicare’s problems. Opinions about what steps to take are divided along political lines. In a press statement, Treasury Secretary Timothy Geithner said while the ACA “has significantly strengthened Medicare’s finances and extended the life of the Medicare trust fund” the Trustees’ report underscores “the need to act sooner rather than later to make reforms to our entitlement programs.” Administration reforms proposals have focused on quality improvements, incentive payments and capping Medicare expenditures based on the gross domestic product.

On the other side of the aisle, House Speaker John Boehner (R-OH) offered a different take on the trustee report. With a nod to Rep. Paul Ryan’s (R-WI) budget and Medicare reform proposals Boehner said in a press statement: “We’ve outlined a proposal that would mean no changes for anyone age 55 and up, while making reforms to ensure that Medicare is around when younger Americans and future generations are ready to retire. The biggest threat Medicare faces right now is the status quo. The Trustees' report makes it clear that if we do nothing, Medicare will not be able to pay promised benefits to American seniors  --  and sooner than we thought.”

A study by the nonpartisan Kaiser Family Foundation found that raising the Medicare eligibility age from 65 to 67 in 2014 would generate about $7.6 billion in net savings to the federal government, but it would add $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree healthcare costs.

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