Medicare trust fund will run out in 2026, report states

Medicare's Hospital Insurance (HI) Trust Fund likely will be depleted in 2026—an estimate that has not changed since last year's report, according to the trustees' annual report released Monday.

Medicare 101: Cheat sheets for Parts A through D

The trust fund covers the cost of Medicare's hospital insurance program, known as Medicare Part A. Other Medicare programs—such as those that cover outpatient care, known as Medicare Part B, and prescription drugs, known as Medicare Part D—are funded separately.

Report details

Overall, the trustees projected that by 2038, Medicare's total costs will increase to 5.9% of GDP—up from 3.7% of GDP last year. By 2095, Medicare costs are expected to reach about 6.5% of GDP. The trustees attributed the slightly faster Medicare growth rate to the expected uptick in Medicare population growth and increased demand for health care services.

The report projected that by 2026 the HI Trust Fund will have only enough revenue to cover 89% of its costs. The prediction is unchanged from last year.

The report found reserves in the HI Trust Fund fell by $2 billion, leaving about $200 billion at the end of 2018.

But next year, the trustees wrote spending is "expected to be slightly higher than last year's estimates." In addition, they noted that the HI Trust Fund is expected to take in less money than it did in 2018 because of lower payroll tax revenue and lower Social Security benefit taxes.

The trustees said the fund could be made solvent by increasing payroll taxes from 2.9% to 3.81% or, alternatively, by reducing program spending by 19%—a steep cut that could push more costs onto beneficiaries.

The trustees called on Congress to take "action sooner rather than later" to reduce or eliminate the fund's financial shortfalls. "The projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation," the report stated.

Reaction

HHS Secretary Alex Azar and CMS Administrator Seema Verma separately used the report to criticize Democrat's proposals to expand Medicare and create a universal health care system, which they said would further strain the program.

"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," Azar said.

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

However, Democrats pointed to Republicans for the looming Medicare shortfalls.

House Ways and Means Committee Chair Richard Neal (D-Mass.) said, "We continue to see how the Medicare trust fund has not recovered from years of Republicans' harmful policies."

Meanwhile, the American Hospital Association (AHA) said that the report should be a wake-up call for all lawmakers to adopt reforms to sure up Medicare's solvency, Modern Healthcare reports. For example, AHA said Congress could raise the Medicare eligibility age to align with Social Security and incorporate means testing for higher income beneficiaries (Stein, Washington Post, 4/22; King, Modern Healthcare, 4/22; Tozzi, Bloomberg, 4/22).

Medicare 101: Cheat sheets for Parts A through D

Through the years Medicare has grown more complicated, including private supplemental insurance and prescription drug coverage. Download our cheat sheets to learn how each of the four parts of Medicare works, and why they’re so important for provider organizations:

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