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Analysis

Medicare Trust Fund to Fall Short After 2026, as Costs Continue to Rise

By Steven Porter  
   April 22, 2019

Trump administration health officials cited the annual report as evidence the government should avoid 'Medicare-for-All.'

One of Medicare's two trust funds is on course to run short on funds in just seven years, according to an annual report released Monday by the Medicare Board of Trustees.

The hospital insurance trust fund is projected to have enough money to pay full benefits until 2026, the report says, affirming last year's projection. That news, coupled with the fact that Medicare costs keep rising, gave Trump administration officials another opportunity to criticize "Medicare-for-All" opportunities as unwise.

"Instead of trying to expand Medicare into a universal entitlement that even covers wealthy Americans of working age, as some have proposed, we need to fulfill Medicare's promise to our seniors," said Health and Human Services Secretary Alex Azar in a statement.

But others said linking Monday's report directly to current Medicare-for-All proposals is a bit of a stretch. The proposals being considered wouldn't simply expand the existing Medicare program, said Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation.

"The benefits are better and there is no premium or cost-sharing," Levitt wrote in a tweet. "The current Medicare hospital trust fund isn't relevant to these proposals."

Azar said the administration's 2020 budget proposal would extend the Medicare hospital insurance trust fund's life by eight years through value-based payment initiatives and efforts to lower prescription drug prices.

"These proposals complement the work we are doing administratively at HHS to lower costs in Medicare for American patients and transform our healthcare system into one that treats you like a person, not a number," he added.

Centers for Medicare & Medicaid Services Administrator Seema Verma said in a statement that Monday's report "delivered a dose of reality" in the face of ill-advised proposals.

"Stripping around 180 million Americans of private coverage and adding them to Medicare won't fix the problem," Verma said.

"If we do not take the fiscal crisis in Medicare seriously, we will jeopardize access to health care for millions of seniors," she added.

The trustees' report projected also that Medicare costs will rise from about 3.7% of gross domestic product in 2018 to 5.9% of GDP by 2038—then about 6.5% of GDP by 2093.

American Hospital Association President and CEO Rick Pollack called on Congress to shore up the trust fund through a variety of tactics.

"Solutions to address this problem must include tackling the skyrocketing costs of drugs for hospitals, which will continue to grow at an increasingly fast rate in coming years," Pollack said in a statement. "Policymakers should also consider structural reforms to the program that will have a real long-term impact, such as additional means testing for higher income beneficiaries, raising eligibility age to be consistent with the Social Security program, phasing in adjustments to the FICA contributions that fund the program, reducing regulatory burden and accelerating delivery system reforms that better coordinate care, especially for the chronically ill."

Editor's note: This story was updated Tuesday, April 23, with additional information.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

This year's annual report affirms last year's finding that one trust fund will have enough money until 2026.

The news comes as Medicare costs are projected to accelerate from about 3.7% of GDP last year to about 5.9% of GDP in 2038.

Officials took the opportunity to bash 'Medicare-for-All' proposals as unworkable.

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