Medicare Part A to Run Out Three Years Earlier Than Predicted, Report Says

Allison Inserro

Trustees for Medicare reported Tuesday that Medicare Part A, which covers hospital bills, will become insolvent in 2026, 3 years earlier than the projection last year.

In its annual report, the trustees cited lower payroll taxes attributable to lowered wages in 2017, lower levels of projected gross domestic product (GDP), and lower income from the taxation of Social Security benefits as a result of the tax-reform package President Trump signed into law in December 2017.

Part A spending is projected to be slightly higher than last year’s estimates, because of legislation that increased hospital spending, and higher Medicare Advantage payments.

In 2017, income into Medicare Part A, formally known as the Hospital Insurance Trust Fund (HI), exceeded expenditures by $2.8 billion. The report projects deficits in all future years until the trust fund becomes depleted in 2026.

The assets were $202 billion at the beginning of 2018, representing about 65% of expenditures during the year, which is below the trustees’ minimum recommended level of 100%.

Growth in HI expenditures has averaged 2.1% annually over the last 5 years, compared with non-interest income growth of 4.9%.
Over the next 5 years, projected annual growth rates for expenditures and non-interest income are 6.2% and 5.3%, respectively.

In response to the report, there were calls for both reforms and blame.

“We should keep our attention focused on reforming these programs so that they can truly benefit future generations,”
Senate Finance Committee Chairman Orrin Hatch, R-Utah,  said in a statement.

In a statement sent to reporters after the report was released, Senator Ron Wyden, D-Oregon, ranking member of the Senate Finance Committee, said the  “report should eliminate any doubt that Trump’s tax law yanked Medicare closer to insolvency.”

The report said that Medicare costs will grow from about 3.7% of GDP in 2017, to 5.8% of GDP by 2038, and will increase gradually thereafter to about 6.2% of GDP by 2092.

The annual report also included Social Security projections. Those costs  equaled 4.9% of GDP in 2017 and are expected to rise to 6.1% of GDP by 2038, decline to 5.9% of GDP by 2052. By 2092, it will rise to 6.1% of GDP.
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