Medicare Trustees: Funds 'Sufficient' Through 2030

The slowing growth of healthcare costs has extended Medicare's projected lifespan 13 years beyond projections made in 2009, the last report issued before the passage of the Patient Protection and Affordable Care Act.

The Medicare Hospital Insurance Trust Fund will have "sufficient funds to cover its obligations until 2030," the Medicare Board of Trustees said Wednesday in its annual financial review of the $613 billion program.

This year's projections are much the same as in last year's report, when trustees extended the solvency of the program another 13 years beyond projections in 2009, the last report issued before the passage of the Patient Protection and Affordable Care Act.

The report showed that Medicare covered 53.8 million people in 2014. Total Medicare expenditures were $613 billion, and income was $599 billion. The average benefit per enrollee was $12,432, about 2% higher than last year. Medicare outlays in 2014 were slightly lower for Part A and Part D, and higher for Part B than previously estimated.

The trustees said the projected portion of benefits that can be financed with dedicated money is 86% in 2030, falls to 79% in 2039, and then gradually increases to 84% in 2089. The 75-year actuarial deficit in the hospital Insurance Trust Fund is projected at 0.68% of taxable payroll, down from 0.87% projected in last year's report. The trustees credited the improved outlook to a change in methodology that shows a lower estimate for long-range healthcare cost growth.

Obama administration officials wasted no time crediting the Affordable Care Act with extending the life of Medicare and slowing cost growth.

"Once again, these reports demonstrate how the Affordable Care Act has bolstered Medicare and shored up the program's finances," Treasury Secretary Jacob J. Lew said in remarks accompanying the report.

"When the President signed healthcare reform into law, the Trustees projected that it would extend the life of the Medicare Trust Fund by 12 years, from 2017 to 2029. Since then, the Affordable Care Act has helped reduce the rate of healthcare price increases to their lowest rate in 50 years. As a result, the trustees have over the past several years revised down their projections of Medicare costs, and the projected life of the Medicare Trust Fund now extends to 2030, even further than estimated when the Affordable Care Act was signed."

Per-enrollee Medicare spending growth has averaged 1.3% over the past five years. Over the next decade per-enrollee Medicare spending growth, projected at 4.2%, is expected to be lower than the growth in overall health expenditures, which is projected at 5.1%.

Future Needs
Cori Uccello, Senior Health Fellow at the American Academy of Actuaries, says this year's report "continues what in the last few years has been somewhat of an improvement, especially in the long term."

"However, the program still faces significant challenges in the long term," Uccello says. "It's not just that the HI Trust fund is going to be depleted in 2030. It's that in general medical spending over time is still going to make up an increasing share of GDP and that is going to put pressure on the federal budget, and on household budgets. At least on the Part B and Part D side they are going to have to pay higher premiums down the road as spending goes up."

"So, the optimism in this report regarding lower long-term spending shouldn't make us complacent about the need to make changes to the program to ensure its sustainability in the long term."

Those changes, she says, include the push for structural reforms that move the program away from volume-based to value-based compensation.

Those sentiments were echoed by Andy Slavitt, the acting Administrator the Centers for Medicare & Medicaid Services, who warned against complacency.

"We must continue to transform our healthcare system into one that delivers better care and spends our dollars in a smarter way for beneficiaries so Medicare can continue to meet the needs of our beneficiaries for the next 50 years and beyond," Slavitt said in prepared remarks.

Slavitt's remarks were echoed by Mary R. Grealy, president of the Healthcare Leadership Council, in a statement released by her office Wednesday. She called the report "A sharp reminder that time is limited for policymakers to take prudent, responsible action to secure Medicare's financial future for generations to come… We need to begin the debate now on how to structurally modernize Medicare so that there is ample time to enact and implement essential improvements before insolvency looms."

Part B premiums will be finalized later this year, but CMS projects that 70% of beneficiaries won't see a premium increase in 2016 because it is projected that there will be no cost-of-living increases in Social Security benefits.

The remaining 30% of beneficiaries would pay a higher premium based on this projection. These include only individuals who enroll in Part B for the first time in 2016; enrollees who do not receive a Social Security benefit; beneficiaries that are directly billed for their Part B premium; and current enrollees who pay an income related higher premium. Decisions about premium changes will be made in October and depend on a variety of factors, CMS said in a media release.

The Medicare Trustees are Lew, Health and Human Services Secretary Sylvia M. Burwell, Labor Secretary Thomas Perez, Acting Social Security Commissioner Carolyn Colvin, Obama Administration public appointees Charles Blahous III, and Robert Reischauer. Slavitt is the board secretary.