Medicare Gains Year of Solvency

Medicare insolvent social security funding

Thursday was a busy day for Medicare beneficiaries who keep track of how government actions may affect their healthcare. First, the GOP-controlled Senate released the latest version of its healthcare bill. The promising news there was that the latest bill does not repeal taxes that bolster funding for Medicare.

Shortly after that report, however, there was new information about long-term funding for Social Security and Medicare. The Trustees of Medicare and Social Security released their annual report Thursday afternoon about the financial outlook for both programs. While each annual report comes with a call for reforms to both programs in order to curb spending, yesterday’s news came with a bit of promising information. The year in which Medicare Hospital Insurance (HI) coverage will be depleted was moved from 2028 to 2029, when compared to the 2016 report.

Short-term view of Medicare spending

This means that there will not be any mandatory spending cuts to Medicare this year. In addition, it means that there will be no need for the Independent Payment Advisory Board (IPAB), which would be initiated to propose cuts if Medicare spending levels exceeded its targets. Lower spending in 2016, lower projected inpatient hospital utilization and slightly better projected hospital insurance deficit in 2017 than in 2016 were the contributing factors to the extended solvency projection.

“For 51 years, Medicare has played a crucial role in providing healthcare for America’s senior citizens,” said Health and Human Services Secretary Tom Price, M.D. “At HHS, we take seriously our responsibility to protect Medicare for this generation and those to come, and we are pursuing all available avenues to improve Medicare’s sustainability in ways that put patients first.”

Total Medicare spending was slightly lower than estimated in last year’s Trustees Report. Outlays were slightly lower for Medicare Part A and Medicare Part D than previously estimated while Medicare Part B expenditures were very close to the 2016 estimate. The Trustees project that the 2018 Medicare Part B premium will remain at the 2017 levels and that the Social Security cost of living adjustment (COLA) would be 2.2 percent. The COLA increase, at 0.3%, is the biggest uptick in years, particularly after there was no increase in 2016. This means seniors can expect an average increase of $28 per month in Social Security.

Both Social Security’s cost-of-living adjustment and the Medicare Part B premium are to be announced in the fall.

Long-term view of Medicare spending

According to the nonpartisan Congressional Budget Office, Medicare and Social Security made up about 40 percent of federal spending during the past decade. That share is projected to grow in the future. However, according to the Center on Budget and Policy Priorities, Social Security could still pay nearly 75% of scheduled benefits via task income and Medicare HI could still pay more than 80% if trust funds were depleted.

While extra time to find better ways to fund Medicare, and a slight boost in Social Security payments, is good news, there is still a lot to ponder. The Committee for a Responsible Federal Budget points out that the Trustees project that Medicare Part A faces a shortfall of 0.64% of taxable payroll as Social Security faces a shortfall of 2.8% during the next 75 years. In addition, the Trustees project that  Medicare Part B and Medicare Part D will continue to grow precipitously.

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