Trustees Say Medicare Hospital Trust Fund Will Be Exhausted in 2024

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The Medicare Hospital Insurance Trust Fund will be exhausted in 2024, five years earlier than last year's estimates, according to the annual Social Security and Medicare Trustees report (Ohlemacher, AP/Bloomberg BusinessWeek, 5/13).

Medicare has been paying out more than it has taken in since 2008. In 2010 alone, the program spent $535 billion and used $32 million from its trust fund -- which is funded by payroll taxes -- to compensate for shortfalls (DoBias, National Journal, 5/13).

The trustees attributed the accelerated insolvency to higher provider salaries and the continued effect of the recession, which has reduced Medicare tax receipts and increased expenditures (Daly, Modern Healthcare, 5/13).

Once the trust fund runs out in 2024, Medicare no longer will be able to pay 100% of benefits. The trustees estimate that the program could pay 90% of benefits beginning in 2024 and 75% of benefits starting in 2045 (Wolf, "The Oval," USA Today, 5/13).

Effect of Health Reform

Commenting on the report, the Obama administration noted that the federal health reform law added eight years of solvency to the Medicare trust fund and that, without reform, the fund would be depleted by 2016 (CMS release, 5/13).

"We have heard in today's Medicare Trustees report that there is no question we've strengthened Medicare," HHS Secretary Kathleen Sebelius said, adding, "But there is still work to be done" (National Journal, 5/13).

However, USA Today noted the Medicare estimates are "suspect" because they rely on billions of dollars in savings projected under the overhaul, such as:

  • Cuts to physicians' Medicare payments; and
  • Improvements in health care providers' productivity ("The Oval," USA Today, 5/13).

GOP Reaction

Responding to the report, House Speaker John Boehner (R-Ohio) and other GOP lawmakers reiterated their recent calls for entitlement reform.

Boehner said that the new report validates a proposal in the GOP's House-approved fiscal year 2012 budget resolution (H Con Res 34) that would address the threat to Medicare's solvency by transforming it into a voucher program. "We're still waiting to see a similar plan from President Obama and the Democrats who run Washington," he said (Harrison, CQ Today, 5/13).

Paul HIllery
Based on data in the Kaiser Family Foundation Medicare Chartbook (4th) 2010, if the payroll tax for Medicare went from 2.9% (1.45% split) to 6.5% (3.25% split) Medicare would have eliminated the doughnut hole, been funded 100% by payroll, premiums and other than US General Fund. If Payroll tax went to 8% (4% split), there would be no doughnut hole. no need for General Fund OR other premiums. and eliminate ty! Privatizing Part D cost senior much more in premiums, so privatizing all of Medicare would be horrendous for a vulnerable population!

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