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  • Washington Highlights

    Medicare Trustees Report Continues to Project Medicare Insolvent by 2026

    Andrew Amari, Hospital Policy and Regulatory Specialist

    The Medicare Board of Trustees April 22 released their 2019 annual report. Trustees project Medicare’s Hospital Insurance (HI) Trust Fund — which funds Medicare Part A — will be depleted by 2026, the same as last year’s estimate (see Washington Highlights, June 8, 2018).

    Although their insolvency projection remains the same, trustees expect lower HI income and higher expenditures compared to last year’s estimates. Notably, trustees project annual growth rates of 5.7% for non-interest income and 7.0% for expenditures over the next five years. Lower income is predicted due to lower payroll and Social Security benefit taxes.

    The Supplementary Medical Insurance (SMI) Trust Fund — which funds Medicare Parts B and D — is expected to be adequately financed in all years because premium income and general revenue income are reset annually to cover expected costs and ensure a reserve for Part B costs. However, the aging population and rising health care costs are causing SMI projected costs to grow steadily from 2.1% of the gross domestic product (GDP) to approximately 3.7% of GDP in 2038.

    Currently, Medicare’s costs comprise 3.7% of GDP, but trustees project costs will grow to 6.0% of the GDP in 2043 and 6.5% in 2093. Additionally, a Medicare funding warning has been issued for the second consecutive year and trustees note that substantial changes are required to address Medicare’s financial challenges.