The Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Trustees) recently released a report on the financial and actuarial status of the Medicare Trust Funds. The Medicare Hospital Insurance Trust Fund (HI) and the Supplementary Medical Insurance Trust Fund (SMI) are two separate Medicare trust funds from which payment for Medicare Part A, B, C and D benefits are made. The Social Security Act requires the Trustees to oversee and report annually on the financial operations of the Medicare trust funds. In 2016, the Trustees found that Medicare covered 56.8 million people in 2016. Approximately one third of these beneficiaries have chosen to enroll in Part C private health plans that contract with Medicare to provide Part A and Part B health services. In 2016, Medicare expenditures totaled $678.7 billion and total income was $710.2 billion. Total incomes consisted of $700.4 billion in non-interest income and $9.8 billion in interest earnings. Additionally, the assets held in special issue U.S. Treasury securities increased by $31.5 billion to $294.7 billion.
The Medicare Trustees reported the following findings:
- The HI will remain solvent through 2029, a year longer than the 2016 projection. The improved HI solvency forecast is due to a slower rise in healthcare costs than expected and predictions that enrollees would use hospital services less often.
- The HI is not adequately financed over the next 10 years. The report revealed that modest surpluses would continue from 2017 through 2022. The fund would then return to deficits until 2029, when the trust fund becomes depleted.
- The HI forecast is secure enough that it would not trigger the Affordable Care Act (ACA) provision requiring the Independent Payment Advisory Board to make cuts to the program. The ACA requires those cuts when Medicare spending is expected to exceed certain benchmarks.
Despite the slightly improved outlook, the Medicare Trustees warned that baby boomer aging and rising health care costs will cause Medicare expenses to increase and further deplete the Medicare Trust funds.
The Medicare Trustee’s 2017 Annual Report is available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2017.pdf.