Medicare trustees again sound alarm about looming depletion of hospital fund

Medicare spending costs money
The depletion of Medicare's hospital fund still looms, the trustees said Wednesday. (Getty/zimmytws)

The Medicare board of trustees held steady with its prediction on when the program’s hospital fund will run dry: 2026. 

In an annual report (PDF) released Wednesday, the trustees said hospital expenditures exceeded income by $5.8 billion last year. They expect similar trends to continue until the fund runs out in six years. The 2026 estimate has remained the same over the past several years of reports. 

Medicare’s Hospital Insurance Trust Fund has missed the trustees’ tests of short-term financial adequacy every year since 2003, according to the report. It also marks the third year in a row that the trustees have issued a funding warning for the program. 

Total Medicare spending in 2019 was $796 billion, according to the report. 

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The trustees did say that despite the looming depletion of the fund, Congress has never allowed the hospital fund to fully run out. And the sooner policymakers act, the more time they have to roll out an extensive plan, the trustees said.

“The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges,” the trustees said. “The sooner solutions are enacted, the more flexible and gradual they can be.”

“The early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior,” they said.

While the fund backing Part A remains a risk, the funds for prescription drug coverage in Parts B and D are set to be stable for the foreseeable future, according to the report.  

That’s because these segments of the program are designed differently from the hospital benefit. Income and premium revenue reset annually, which allows the program to build a reserve for Part B contingencies and cover expected costs. 

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The trustees also projected that Part B premiums will be about $153 in 2021. Premiums will be finalized in the fall. 

The trustees caution, however, that the constant evolution in medicine makes it hard for long-term projections to be reliable. They also note that none of the projections account for any impacts related to the COVID-19 pandemic. 

“Projections of Medicare costs are highly uncertain, especially when looking out more than several decades,” the trustees said. “No one knows whether future developments will, on balance, increase or decrease costs.”