Medicare trustees say hospital trust fund will run dry by 2028

The annual report card from the Boards of Trustees for Medicare paints a grim financial picture for the future of the program.

Most notably, it predicts Medicare’s Hospital Insurance (HI) trust fund, which serves Medicare Part A, will be depleted by 2028, two years earlier than the projection in last year’s report.

“Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the report said. “Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Within the Obama administration, officials are focusing on positives of the report as it relates to overall healthcare spending. While expenditures in the HI fund have exceeded income every year since 2008, trustees once predicted it would be depleted by 2017. That was before the Affordable Care Act (ACA), and the report takes into account the law’s various cost-reduction measures.

“Some of this reduction in Medicare spending is the direct result of payment reforms in Affordable Care Act,” said Andy Slavitt, acting administrator of CMS, according to The Hill.

The report also noted slower growth in Medicare’s spending per enrollee, but the trustees warned it wouldn’t be enough to keep pace with the aging population. Unless healthcare organizations transition to “more efficient models of care delivery,” the report said access and quality of care for Medicare beneficiaries would decline compared to those covered by private insurance.

One factor unaccounted for in the report is the changes to physician payments under the Medicare Access and CHIP Reauthorization Act (MACRA). Trustees did touch on the law, however, and offered some concerns on its long-term impact.

“The law specifies the physician payment update amounts for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases,” the report said. “The specified rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large. The gap will continue to widen throughout the projection, and the Trustees anticipate that physician payment rates under current law will be lower than they would have been under the (sustainable growth rate) formula by 2048.”

The report also predicts the Independent Payment Advisory Board could be triggered in 2017. Introduced under the ACA, the board is supposed to take action when Medicare spending exceeds specified growth targets. Republican majorities in Congress have never authorized the panel to be formed, and trustees had made the same prediction it would be triggered the following year in its 2015 report.