Medicare Trust Fund To Run Out In 2024, Report Says

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imageMedicare’s Hospital Insurance Fund (HI Trust Fund) will be totally depleted in 2024, five years earlier than originally projected, according to the Medicare Trustees Report issued last Friday.

The report stipulates that HI Trust Fund expenditures have exceeded annual income since 2008, a pattern the trustees believe will continue under current law in all future years. At current rates of spending and cost growth, it states, HI Trust Fund assets will cover annual deficits through 2023, with asset depletion beginning in 2024. The fund has traditionally relied on interest earnings and asset redemption to meet the deficit; in 2010, Medicare tapped it for more than $32 billion to make up for the shortfall.

The trustees attribute the five-year change from last year’s projected date of depletion to the slowdown of the national economy, which caused tax revenues to decline, as well as to higher-than-expected costs. Projecting earlier depletion dates from a previous report is not an uncommon occurrence, the report’s authors note, pointing out that a seven-year-shorter projection was reported in 2004 due to similar economic conditions. By contrast, the trustees' projection does not take into consideration any adjustments to the current physician payment formula and includes the anticipated payment cut of 29% to take effect on January 1, 2012.

Meanwhile, the American Medical Association (AMA) considers the content of the report fodder for the argument that a more lasting payment must replace the current Medicare physician payment formula or sustainable growth rate (SGR).“Physicians who care for Medicare patients form the foundation of this critical program, and the Trustees confirmed today that they face a steep payment cut of nearly 30% on January 1,” says J. James Rohack, MD, immediate past president of the AMA. “This cut is the highest ever scheduled under the broken Medicare physician payment system, and it threatens access to care for our nation’s seniors, military families, people with disabilities, and the baby boomers now entering Medicare. The longer it takes to reform this system, the greater the cost.”

On the flip side, members of President Barack Obama's administration claim that although significant action must be taken to ensure the fund’s solvency, it would have run dry even earlier-- in 2016-- without the reforms contained in the Patient Protection and Affordable Care act.“This report shows that without the Affordable Care Act, the outlook for the Hospital Insurance Trust Fund today would be much worse," observes Donald Berwick, MD, administrator of the Centers for Medicare & Medicaid Services (CMS). “CMS is implementing critical reforms to improve care and reduce costs and improve the overall health of Medicare’s beneficiaries and the trust fund.”

Other players on the administrative team say it is important to preserve the value of the program without shifting some of the cost burden to seniors. “We must remember that preserving Medicare means not only maintaining the solvency of the trust fund, but also maintaining the value of the benefit and the financial and health protections the program provides to the people it serves,” asserts Joe Baker, president of the Medicare Rights Center. “Half of people with Medicare live on incomes below $20,000 per year.”

Baker adds, however, that payment formulas and asset depletion dates aren’t at the heart of the problem. Rather, he says, increasing overall healthcare costs are the culprit, and the shifting of costs from one party to another does nothing to address this issue. “The ACA achieves savings without cutting benefits or increasing consumer costs, through promoting prevention, paying for quality over quantity, and improving care coordination that can help people with Medicare, including those with multiple chronic conditions, stay healthier.,” he asserts. It is solutions like these that we must support to make Medicare stronger.”