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The Future of Medicare’s Budget




lesley signature-1According to the 2019 annual report released this month by the Medicare Board Of Trustees regarding Medicare’s two separate trust funds- the Hospital Insurance (HI) Trust Fund, and the Supplementary Medical Insurance (SMI) Trust Funds- found that one of these two Medicare trust funds is on track to run out of reserves in seven years- these estimates aligning with last year's projections. 

Due to the aging population, spending for the Hospital Insurance Trust Fund, which covers Part A and Part C plans, could conceivably be depleted by the year 2026 the report states. Medicare costs are estimated to continue rising during this time. In 2018 Medicare covered 59.9 million people aged 65 and older, and 8.8 million disabled people. As Baby Boomers age into Medicare, roughly 10,000 enrolling in Medicare daily, this will continue to put strain on the public healthcare program in the near future, aggravating financial challenges. Increases in volume and intensity of healthcare services will also create issues, the trustees explain.

The report further  found that the costs associated with the Supplementary Medical Insurance (SMI) Trust Fund, which funds Part B and Part D of Medicare, is likely to grow steadily from 2.1% of gross domestic product in 2018 to about 3.7% of gross domestic product by 2038. The SMI fund will likely remain adequately financed into the undetermined future because current laws provide financing from general revenues and beneficiary premiums each year to meet the anticipated costs for the next year.

Medicare’s most recent financial projections indicate the program’s need for “substantial changes,” especially when it comes to funding hospital services and payment, the report says.

“If the health sector cannot transition to more efficient models of care delivery and if the provider reimbursement rates paid by commercial insurers continue to be based on the same negotiated process used to date, then the availability, particularly with respect to physician services, and quality of healthcare received by Medicare beneficiaries would, under current law, fall over time compared to that received by those with private health insurance,” the trustees write.

Solutions are needed sooner, rather than later, the trustees also emphasized.

“The sooner solutions are enacted, the more flexible and gradual they can be,” they write in the report. “The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.”

In response to the report’s release, HHS Secretary Alex Azar describes the trustees’ findings as a “sobering reminder” that policymakers and stakeholders need to be supporting Medicare now and in the future.

“We need to fulfill Medicare’s promise to our seniors,” he says in HHS’ official statement. “President Trump’s 2020 budget proposes reforms that will extend the life of the Medicare hospital insurance trust fund by eight years through lowering prescription drug prices and paying for value. 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.”

Ensuring Medicare program solvency and decreasing healthcare spending are top priorities for the Current Administration. The President’s fiscal year 2020 budget specifically includes a number of initiatives with the goals in mind, including site-neutral payments and programs targeting prescription drug prices and reimbursement.

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