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Medicare Trust Fund Running Out of Money

Friday July 8th, 2016   •   Posted by Craig Eyermann at 6:14am PDT   •  

medicare2-210x210Yet another federal government trust fund supporting the welfare of America’s elderly population appears set to run out of money within the next 12 years. This time, it’s Medicare’s Hospital Insurance Trust Fund which, when it runs out of money as projected in 2028, will shrink the amount of money that goes to help pay Medicare’s Part A hospital insurance program by 13%. The Mercatus Center’s Brian Blase describes how the trust funds financial health has changed since last year’s Trustees’ Report.

In 2015, Medicare financed health care services for an estimated 55 million people at a total cost of nearly $650 billion. Last week, Medicare’s trustees—Treasury Secretary Jack Lew, Health and Human Services Secretary Sylvia Burwell, Labor Secretary Thomas Perez, and Acting Social Security Commissioner Carolyn Colvin—submitted the annual report of the program’s finances. Although the program’s finances have slightly deteriorated, not much has changed from last year’s report.

The insolvency date of the Hospital Insurance (HI)/Part A trust fund was moved up two years to 2028; according to the report, “[a]s in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years.” But the payroll tax financed HI trust fund is just one part of Medicare, and Medicare’s other parts continue to claim increasing amounts of general tax revenue. Once again, the trustees have sounded an alarm that policymakers should enact legislation to deal with Medicare’s “substantial financial shortfall… sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Keep in mind that the same federal policymakers knew of Puerto Rico’s decade-long fiscal deterioration, yet waited until just two days before the territory’s government’s imminent default on its constitutionally-guaranteed debt before taking any action that might mitigate the territory’s decaying fiscal situation, which didn’t do anything to keep it from defaulting on making its debt payments anyway. Timely action that minimizes the impact on beneficiaries, providers and taxpayers just isn’t something they prioritize doing.

The 2016’s Trustees’ Report is available here. The report indicates that Medicaid’s Hospital Insurance Trust Fund will start running a deficit in four years, and will be completely depleted in 2028.

When that happens, the amount of money that is collected from Medicare’s payroll tax collections will only be enough to cover an estimated 87% of the projected full cost of providing Medicare’s Part A coverage in 2028. That amount will then steadily fall to 79% of Medicare’s Hospital Insurance program by 2043, just 15 years later.

How many elderly Americans do you suppose will be ready to come up with the missing 13% to 21% of the cost of being hospitalized once Medicaid’s Hospital Insurance Trust Fund runs out of money?

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July 2016