Annual Medicare Trustees’ Report

By May 6, 2019 Commentary

Well, sorry, this is a depressing way to start a week, but sooner or later I knew I had to give a quick summary of the Medicare Trustees’ Annual Report to Congress, recently released for 2019.   (Trustees’ Report)   Medicare has two basic trust funds, the Hospital Insurance one that covers Part A benefits and the Supplemental Medical one that covers some of Part B benefits.  The Trust Funds get money from payroll deductions, premiums and some general revenue.  They are spending more than is coming in, so the balances are shrinking.   Both Funds are in deep shit, to be blunt, and have been for years, especially since the number of new beneficiaries is growing a lot faster than the number of workers who can support their health costs, but our pathetic policymakers don’t have the courage to even talk about it as a problem, much less do something to address the problem.  Theoretically, when the Trust Funds run out of money the level of benefits gets reduced, something neither patients or providers would appreciate, and that might get policymakers attention.  Medicare expenditures are currently over 3.5% of GDP and are projected to rise to about 6% by 2040 or so, under current reimbursement law, and then roughly plateau.  Under an alternative scenario in which reimbursements rise, spending keeps growing to over 8%.  Medicare covered about 60 million people in 2018, 8.8million of those were disabled.  Total spending was about $741 billion and total income about $756 billion, a small part of which was interest income.  The Funds have a balance of about $305 billion.

The Trustees currently project the Hospital Fund, which has around $200 billion in assets, will run out in 2026.  That is a mere 7 years from now.  This year, the Fund will spend more than in takes in, as income will be only about 62% of spending, and each succeeding year the Fund will deplete faster and faster.    The Trustees note again that current and future provider reimbursement levels are likely to prove unsustainable and will have to be increased to maintain access.  That will further stress the Funds.  The Supplemental Fund is in better shape because the law requires the premiums and general revenue for that program be reset to meet expected spending.  But the Trustees warn, as they required to do, that for the third year in a row there is a funding emergency because of the level of imbalance in spending and revenue.  So far Congress has done absolutely nothing.  This is a bad problem for a country that has a huge debt and a huge annual deficit and has been fortunate in having relatively low interest rates and inflation for a long time, and a still healthy economy.  When the economy turns down and/or inflation picks up, things are going to look even worse.  We have to take hard steps, instead some moronic politicians are promising even more “freebies”.  How about a little spending restraint?  Here are some ideas to truly protect Medicare.  Make wealthier people pay the full cost of their Medicare coverage.  Make everyone move into Medicare Advantage and make the plans engage in full bidding competition and allow direct capitation to financially responsible provider systems.  Take the disabled off Medicare and move them to the states, who can use Medicaid or another program for these patients and who can make more local decisions about who should be eligible and what kind of coverage they get.  Disability is a joke now, with some truly disabled people, but a lot of middle-aged men who are too “depressed” to make an effort to work.  That is disgraceful when we have so many people working so hard and paying taxes and getting crappy health care coverage themselves.  We can also pray that science comes up with some innovative, and not overwhelmingly expensive, cures to common and expensive diseases, especially Alzheimers and other dementias and cancers.  And we can insist that people who are covered by any government program engage in healthy behaviors or see their coverage cut back.  Sooner or later, some very drastic action is going to be taken.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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