Trustees predict Medicare hospital fund to run out in 2031, 3 years later than 2022 report

A new federal report predicts the Medicare Hospital Insurance Trust Fund will run out of money in 2031, a full three years later than the 2022 report.

The Trustees of the Social Security and Medicare trust funds released an update on the status of the programs on Friday. The report comes as Congress and the Biden administration have debated how to shore up the program.

“Everyone in the Biden-Harris administration is committed to protecting Medicare, and we look forward to working with Congress to strengthen this vital program serving over 65 million Americans,” said Chiquita Brooks-LaSure, administrator of the Centers for Medicare & Medicaid Services.

The 2022 trustees report predicted the hospital trust fund would run out in 2028, but that figure was increased until 2031. 

“At that point, that fund’s reserves will become depleted and continuing income will be sufficient to pay 89% of the total scheduled benefits,” according to a fact sheet on the report. 

One of the reasons for the change is provisions in the Inflation Reduction Act (IRA) such as drug price reform in Medicare. The law includes several reforms such as a cap on out-of-pocket drug costs, an inflationary cap on drug prices and a $35 cap on monthly insulin costs for those in Medicare. The law also gives Medicare the power to start negotiating lower drug prices beginning in 2026.

“The total effect of the IRA is to reduce government expenditures for Part B, to increase expenditures for Part D through 2030 and to decrease Part D expenditures beginning in 2031,” the report said. 

The new negotiation authority for Medicare will lead to savings in Part B. 

“Part D ultimately generates cost-savings at the end of the ten-year period, but many of the gains from negotiated prices and lower trends are initially more than offset by increased benefits and decreased manufacturer rebates,” the report added. 

Other trends that could affect Medicare include a continued shift from inpatient settings to outpatient facilities. A major priority for insurers this congressional session is to install more site-neutral payments that bring pay for hospital-affiliated clinics to those for free-standing clinics.

Meanwhile, the Supplementary Medicare Insurance Trust Fund continues to be adequately financed. The fund relies on premiums from enrolled beneficiaries and contributions from the U.S. Treasury. 

“Although the financing is assured, the rapidly rising Supplementary Medical Insurance costs have been placing steadily increasing demands on beneficiaries and general taxpayers,” the fact sheet said.

There could be some uncertainty in the projections as the trustees warn that more information is needed on the impact of the COVID-19 pandemic. 

The Federation of American Hospitals (FAH) was relieved there is more time before the fund runs out but pressed for a more sustainable solution. 

"“While the deadline has moved, the ultimate goal hasn’t changed," FAH President Chip Kahn said in a statement. "It is vital that stakeholders use this additional time to find workable solutions that will allow the millions of seniors who depend on Medicare to maintain access to the essential care provided by hospitals and physicians."

The report could impact the debate in Congress and the federal government over how to shore up the trust fund. The White House released a plan recently that sought to expand the stability of the trust fund for another 25 years. 

Some provisions of the plan released earlier this month called for expanding the number of drugs eligible for Medicare negotiation and raising taxes on the wealthy. However, it remains unclear if the plan could get through a divided Congress with GOP control of the House.