New Medicare Trustees report projects slightly longer solvency

Image by Colin Dunn via flickr.

Image by Colin Dunn via flickr.

There is some good news coming out of the latest report from the Medicare Trustees. They predict that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2030, four years beyond last year’s projections. Per capita spending is expected to grow more slowly than the overall economy for the next few years, partially due to costs controls under the Affordable Care Act.

However, the report concludes, “notwithstanding recent favorable developments, both the projected baseline and current law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation.”

“Medicare Part A is moving in the right direction but the day of reckoning has merely been postponed to 2030,” said Rosemary Gibson, senior adviser at The Hastings Center and author of “Medicare Meltdown.” Unless something changes, by 2030 it will lack enough money to pay boomers’ hospital bills. “We’re not out of the woods.”

In 2013, Medicare covered 52.3 million people: 43.5 million aged 65 and older, and 8.8 million disabled. About 28 percent of these beneficiaries have chosen to enroll in Part C private health plans, known as Medicare Advantage. These plans contract with Medicare to provide Part A and Part B health services.

Total expenditures in 2013 were $582.9 billion, and, for the second year in a row, per beneficiary costs were essentially unchanged. Total income was $575.8 billion, which consisted of $564.1 billion in non- interest income and $11.7 billion in interest earnings. Assets held in special issue U.S. Treasury securities decreased by $7.1 billion to $280.5 billion. AHCJ has developed easy to analyze spreadsheets and downloadable 2012 expense data by state.

Future costs are expected to increase at a faster pace than either aggregate workers’ earnings or the economy overall. As a percentage of GDP, they will nearly double, from 3.5 percent in 2013 to 6.9 percent by 2088.

The Trustees project slight surpluses in 2015 through 2022, then a return to deficits until the fund becomes depleted in 2030. Part B outlays were 1.5 percent of GDP in 2013. Longer term, Part B is expected to grow to just less than 3.2 percent by 2088 under the projected baseline scenario. These projections are lower than those in last year’s report.

Part D outlays are projected to increase from 0.4 percent of GDP in 2013 to about 1.4 percent by 2088. This is lower than estimates in last year’s report, primarily because the projected drug cost trend for the next 10-year period is lower than last year and rebates are assumed to be higher throughout this time frame, according to the Trustees.

Under current law, Medicare spending would represent 6.3 percent of GDP in 2088. If the reduced price increases for other health services under Medicare are not sustained and do not take full effect in the long range, then it’s estimated that Medicare spending would instead represent roughly 8.4 percent of GDP in 2088. The Trustees concluded that growth under any of these scenarios, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget.

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