The Medicare Board of Trustees released their annual report (249 page download) on the state and stability of the program and two main trust funds, the Hospital Insurance Trust fund and its Supplementary Medical Insurance (SMI) Trust Fund. Here is the executive summary.
The report projects that the Hospital Insurance Trust fund, which pays out for beneficiaries’ inpatient hospital care is set to start running out of money by 2026 in which it will only be able to afford 89 percent of its total cost.
The SMI Trust fund, which covers Medicare Part B and D benefits like outpatient hospital visits, home healthcare and prescription drug costs is expected to be adequately financed for the foreseeable future.
Costs for the program across the board are also projected to shoot upwards over the next decade. According to the report, total costs for Medicare are expected to jump up from 3.7 percent of the GDP to nearly 6 percent of the GDP by 2038 as the population continues to age.
Projecting Medicare costs outward – as stated in the report – is difficult due to the uncertainty of the rate and progress of technological innovation. While the introduction of technology has traditionally raised costs, the trendline toward outcomes-based payments and preventive care could change that equation.
Additionally, the current financial projections of the report are based on cost savings from provisions in the ACA and MACRA that lower increases in Medicare payment rates to providers.
However the report notes that “without fundamental change in the current delivery system, these adjustments would probably not be viable indefinitely.”
One positive indication has been national health expenditures growing lower than historical averages since 2008, even as it still outpaces general economic growth.
Still, the study underscores the ultimate necessity of “further legislation” that “should be enacted sooner rather than later” to ensure the continuing stability of the system.
