Medicare hospital trust fund extended by 5 years to 2036

The Hospital Insurance Trust Fund will be fully solvent for longer than previously projected, according to an annual Medicare Trustee report.

Though the report (PDF) details “significant financing issues,” the program will be able to pay all scheduled benefits until 2036, seven years later than reported in 2023 and five years later than the most recent report indicated.

The Biden administration views the report in a positive light as a result of its economic and health policies, including the Inflation Reduction Act. Biden used the report Monday to show a contrast between his healthcare vision and the “cruel and unnecessary” plans Donald Trump has floated if he were to become reelected, alluding to comments he made indicating he'd consider cutting Medicare and Social Security.

He said Republicans plan to raise prescription drug costs and “transition Medicare to a system that would raise premiums for many seniors.”

The trustees attributed the HI Trust Fund improvement to a policy changing how medical education expenses are calculated for Medicare Advantage rates in 2024, more payroll tax income in an economy performing better than experts expected and lower-than-expected expenses in 2023 on inpatient hospital and home health agency services. Trustees urged lawmakers in the report to take further action.

“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,” said Department of Health and Human Services Secretary Xavier Becerra in a statement. “We will continue this work by negotiating the cost of prescription drugs, ensuring no one with Medicare goes bankrupt paying for lifesaving prescription drugs.”

“Medicare provides a crucial lifeline for over 65 million Americans who depend on this vital program for their health care needs,” said Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure. “The Biden-Harris Administration has taken action to reinforce the program and propose enhancements that would extend its solvency while strengthening benefits. We are committed to protecting Medicare now and for future generations.”

Medicare trustees said one of the program's major challenges is physician payments are not keeping pace with what is needed.

"Absent a change in the delivery system or level of update by subsequent legislation, the trustees expect access to Medicare-participating physicians to become a significant issue in the long term," the report said.

A group of lawmakers and members of the Medicare Payment Advisory Commission (MedPAC) have agreed physician payments should be increased and linked to the Medicare Economic Index.

“This report continues the drumbeat of recommendations that all point out that the payment system is failing patients and physicians," said American Medical Association President Jesse Ehrenfeld, M.D., in a statement. "It would be political malpractice for Congress to sit on its hands and not respond to this report."

AARP CEO Jo Ann Jenkins echoed Ehrenfeld's thoughts, saying Congress "owes it to the American people" to reach a bipartisan solution in extending the viability of Medicare.

The organization said physicians have seen payments decline 29% since 2001—after adjusting for inflation—hurting independent, rural and underserved practices.

MedPAC recently agreed physician payments should be increased but capped its inflationary update at 50% of the Medicare Economic Index for physician services in 2025. That proposal drew backlash for not going far enough to address the underlying issue.

While five additional years of solvency is an improvement, the program still needs significant overhaul for long-term stability, the report says. It suggests raising the payroll tax from 2.9% to 3.25% or reducing expenses by 8%.

The report also highlighted GLP-1 drugs used for weight loss, as pointed out by KFF Senior Vice President Tricia Neuman on social media. These drugs accounted for a 4.4% increase in 2023. Incomes and expenditures are expected to rise 8.2% from 2024 to 2028 due to "increased use of antidiabetic drugs and higher enrollment."

As for the Supplementary Medical Insurance (SMI) Trust Fund, its future is secure indefinitely due to beneficiary premiums and federal contributions that are adjusted automatically each year. Still, the trustees warn that rising SMI costs are causing beneficiaries and taxpayers great strain.