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Medicare’s Hospital Trust Fund Appears Flush Until 2030

Social Security isn’t so lucky, experts say

Medicare’s Hospital Insurance Trust Fund, which finances about half of the health program for seniors and the disabled, won’t run out of money until 2030, the program’s trustees have announced. That’s 4 years later than projected last year and 13 years later than projected the year before the passage of the Patient Protection and Affordable Care Act (PPACA).

Unlike Medicare, however, the part of Social Security that pays for people getting disability benefits is in far more immediate danger. The Disability Insurance Trust Fund is projected to run out of money in 2016, just 2 years from now, unless Congress intervenes, the trustees said.

With regard to Medicare, the news was mostly positive. “Medicare is considerably stronger than it was just 4 years ago,” said Health and Human Services Secretary Sylvia Burwell. She noted that the recent slow growth of the program’s spending will likely mean that the Medicare Part B premium charged to beneficiaries — currently $104.90 per month — will remain the same for the third year in a row.

All of the trustees, however, stressed that Medicare’s financial problems are far from fixed, particularly as 78 million baby boomers are on the verge of joining.

“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,” the report said.

A major change from previous years is that for the first time the Medicare report deviates from current law and does not assume that scheduled deep cuts to physicians who treat Medicare patients will occur. Congress has suspended the cuts each year since 2003, and the trustees assume that will continue until Congress fixes the formula, known as the sustainable growth rate (SGR).

The change “should make the Part B cost projections more useful than they have been in the past,” said public trustee Robert Reischauer. Part B is the part of Medicare that pays for most physician and outpatient costs. Part B does not technically have a trust fund because it is financed by a combination of general tax revenues and beneficiary premiums, but the trustees make projections for its spending each year.

The trustees opted not to wade into the ongoing debate over the extent to which Medicare’s spending slowdown can be attributed to changes to the program made in the PPACA.

Whatever the reason, no one contests the slowdown has been dramatic. Medicare, which covered an estimated 52.3 million people in 2013, spent $582.9 billion, “and, for the second year in a row, per-beneficiary costs were essentially unchanged,” the report said.

The financial picture for Social Security’s disability insurance fund, by contrast, is less encouraging.

“The projected reserves of the DI Trust Fund decline steadily from 62 percent of annual cost at the beginning of 2014 until the trust fund reserves are depleted in the fourth quarter of 2016,” the Social Security report says. After that, the program would be able to pay only 81% of scheduled benefits.

The disability program has seen a dramatic increase in enrollment in recent years, and yet Congress has not taken action to change its financing, which currently is 1.8 percentage points of the overall 12.4% Social Security payroll tax paid by employers and workers.

Sources: Kaiser Health News; July 28, 2014; Medicare Report; July 28, 2014; and Social Security Report; July 28, 2014.

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