By: Ronald M. Schwartz, Writer, The Remington Report
The Medicare Hospital Insurance (HI) Trust Fund (which funds Part A) is projected to run out of money by 2026—three years earlier than projected in last year’s Medicare Trustees report.
“In the year of asset depletion, which is projected to be 2026 in this report, HI revenues are projected to cover 91 percent of program costs” according to the 2018 report released June 5. Which means at that point the program would be unable to pay “full benefits” unless changes were made.
HI Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund, which covers Parts B and D, are included in the annual projections. The Trustees project that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.7 percent of GDP in 2017 to 5.8 percent of GDP by 2038, and then increase gradually thereafter to about 6.2 percent of GDP by 2092.
"In 2017, HI income exceeded expenditures by $2.8 billion. The Trustees project deficits in all future years until the Trust Fund becomes depleted in 2026."
The three-year depletion date for the HI Fund is “attributable to adverse changes in program income.” They include the aging of the baby boom population, plus HI income is projected to be lower than last year’s estimates due to: lower payroll taxes attributable to lowered wages for 2017 and lower levels of projected GDP; and, lower income from the taxation of Social Security benefits as a result of legislation. Also, “HI expenditures are projected to be slightly higher than last year’s estimates, mostly due to higher-than-expected spending in 2017, legislation that increased hospital spending, and higher Medicare Advantage payments.”
In 2017, HI income exceeded expenditures by $2.8 billion. The Trustees project deficits in all future years until the Trust Fund becomes depleted in 2026.
Conversely, the SMI trust fund is expected to be adequately financed over the next 10 years and beyond because premium income and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies.
Trustees Trace “Upward Trend” in HHA Expenditures
For most historical years, HI experience with home health payments had shown “an upward trend, frequently with sharp increases in the number of visits from year to year,” according to HI expenditure analyzed by category. “For 2008 through 2009, the increases were large. Moreover, in certain areas of the country, outlier payments for treatment episodes increased at extraordinary rates during this period, prompting special rules to limit abusive practices. In 2010, limits were placed on the proportion of total payments that an agency could receive in the form of outlier payments, and prosecution of fraud cases resulted in the closing of a number of purported home health agencies. There was a slight decrease in utilization in 2010, followed by large decreases in 2011 and 2012 and a rebound in 2013 through 2015. Data available for 2016 and 2017 show Hospital Insurance decreases in utilization.
“For 2018 and the rest of the projection period, these utilization and intensity increases are assumed to be equal to the growth and aging of the population plus 1 percent annually.” [As in the past, the Trustees establish detailed growth rate assumptions for the initial 10 years (2018 through 2027) by individual type of service.]
Medicare HHA costs also increase by a case mix increase factor. “Case mix increases have been modest and decreased in 2011 and 2012 before rebounding in 2013 through 2016,” the report notes. “HHA case mix increases are projected to increase at a rate of 1.5 percent annually beginning in 2018.”
The Medicare Trustees are: Health and Human Services Secretary, Alex Azar; Treasury Secretary and Managing Trustee, Steven Mnuchin; Labor Secretary, Alexander Acosta; and Acting Social Security Commissioner, Nancy Berryhill. CMS Administrator Seema Verma is the secretary of the board.