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 Medicare Part A Trust Fund Good Only Until 2026, Says New Report

In its latest annual assessment released on April 22, the Medicare Board of Trustees said the Hospital Insurance (HI) Trust Fund, which funds Medicare Part A, will be able to pay full benefits only until 2026, the same forecast as last year.

For its 75-year projection period, the HI Trust Fund actuarial deficit has increased to 0.91 percent of taxable payroll from 0.82 percent in last year’s report, the trustees said. 

“The change in the actuarial deficit is due to several factors, most notably lower assumed productivity growth, as well as effects from slower projected growth in the utilization of skilled nursing facility services, higher costs and lower income in 2018 than expected, lower real discount rates, and a shift in the valuation period,” the report said.

Medicare costs (including both HI and the Supplementary Medical Insurance (SMI) Trust Fund, which funds Medicare Part B and D) will increase from around 3.7 percent of gross domestic product (GDP) in 2018 to 5.9 percent of GDP by 2038, and then increase gradually thereafter to about 6.5 percent of GDP by 2093. 

The trustees said the faster rate of growth in Medicare spending as compared to growth in GDP is tied to faster Medicare population growth and increases in the volume and intensity of health care services.

The report said the SMI Trust Fund, which covers Medicare Part B and D, had $104 billion in assets at the end of last year. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who voluntarily enroll. 

“It is expected to be adequately financed in all years because premium income and general revenue income are reset annually to cover expected costs and ensure a reserve for Part B costs,” the trustees said.
 
But, the report said the aging U.S. population and rising health care costs are causing SMI projected costs to grow steadily from 2.1 percent of GDP in 2018 to approximately 3.7 percent of GDP in 2038. 

On Part D, which provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries, as well as premium and cost-sharing subsidies for low-income enrollees, the projections revealed that Part D drug spending projections are lower than in last year’s report. This is due to slower price growth and a continuing trend of higher manufacturer rebates, the trustees said.
 
Read the report at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html.                       
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