Medicare on solid ground for now but headed for fiscal quicksand

Medicare’s Hospital Insurance (HI) Trust Fund has the wherewithal to pay the full bill for beneficiaries’ stays in hospitals, hospice sites and skilled nursing facilities for the next 12 years.  

That’s five years longer than the agency’s trustees projected last year.

However, once the fund’s reserve monies dry up during or soon after 2036, CMS will only be able to cover 89% of those costs.

The news comes from the Department of the Treasury, which released its annually updated figures May 6 in conjunction with HHS, CMS and the Social Security Administration.

Also encouraging is the outlook for the Disability Insurance (DI) Trust Fund. This is now projected to continue ponying up 100% of total scheduled benefits through at least 2098.

Similarly, the Supplementary Medical Insurance (SMI) Trust Fund is sufficiently funded for the foreseeable future. That’s because its primary financing sources—beneficiary premiums and associated federal contributions—get adjusted automatically ahead of each new fiscal year.

Unfortunately, these bright spots come alongside some sobering warning signs. In a nutshell, both Social Security and Medicare “continue to face significant financing issues,” the Department of Treasure reports in a fact sheet summarizing the latest SSA and HHS reports.

Among the fiscal troubles healthcare-minded policymakers will need to confront in coming months and years:

• The Old-Age and Survivors Insurance (OASI) Trust Fund will run dry in 2033, reducing coverage from 100% of total scheduled benefits to 79%.
   
• If the OASI Trust Fund and the DI Trust Fund projections were to be combined, the resulting projected fund would keep paying 100% of total scheduled benefits until 2035. That’s a year later than Treasury et al. reported last year. However, as of 2035, the combined funds would only be able to pay 83% of scheduled benefits.

Meanwhile, Treasury notes that these two funds cannot actually be combined absent a change in the law; the department combines them in reports merely to “indicate the overall status of” Social Security.

Retirees have reasons for concern beyond their healthcare. SSA trustees expect the program’s trust fund to wither in 2033, paying just 79% of full benefits—unless, of course, legislators take action soon enough to head off such a major disaster for so many.

In any case, Health and Human Services Secretary Xavier Becerra suggests, Americans have good reason to feel secure about Medicare’s long-term fiscal health.

“The Biden-Harris Administration has left no stone unturned in our efforts to strengthen and preserve Medicare, not just for our parents and grandparents but for our children and generations to come,” he said May 6 in prepared remarks. “We will continue this work by negotiating the cost of prescription drugs, ensuring no one with Medicare goes bankrupt paying for lifesaving prescription drugs.”

Treasury Secretary Janet Yellen echoes Becerra’s vote of confidence in the Biden Administration. At the same time, her department signals it is hoping for action in Congress.

“Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls,” according to the Department of Treasury's fact sheet. “Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”

Media coverage of the updated projections indicates the press is taking the government’s efforts at positive positioning with a grain of salt.

“Social Security and Medicare are headed toward insolvency,” one headline states. “Economic growth boosts Social Security and Medicare, but funding crisis still looms,” says another. A third: “Social Security projected to cut benefits in 2035, barring a fix.”

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