The Medicare Board of Trustees released their 2021 annual report on Aug. 31. In the report, the trustees projected that Medicare’s Hospital Insurance (HI) Trust Fund, which funds Medicare Part A, will be depleted by 2026 — the same estimate they provided in their 2019 and 2020 reports (refer to Washington Highlights, April 26, 2019). The board estimated that the COVID-19 public health emergency will have significant effects on both the short-term financing and spending of the Medicare program, but the financial status of the trust funds has not materially changed.
The trustees expected lower HI expenditures compared to last year’s estimates. Notably, they projected annual growth rates of 4.6% for noninterest income and 3.1% for HI expenditures over the next five years. The lower expenditures were projected due to lower projected provider payment updates and the expectation that accelerated and advanced payments in 2020 will be repaid to the trust fund over the next several years, leading to a smaller deficit in 2021 and a surplus in 2022. However, the trustees projected deficits to return in 2023 and persist until the trust fund’s anticipated depletion in 2026.
The Supplementary Medical Insurance (SMI) Trust Fund, which funds Medicare Parts B and D, is expected to be adequately financed over the next 10 years and beyond because premium income and general revenue income are reset annually to cover expected costs and ensure a reserve for Part B costs. However, the trustees expected SMI projected costs to grow 7.2% for Part B and 6.1% for Part D over the next five years.
A Medicare funding warning has been issued for the fourth consecutive year, and trustees continued to note in the report that substantial changes are required to address Medicare’s financial challenges.