Hospital Insurance Trust Fund Insolvency Date Extended by Two Years
Medicare's hospital insurance trust fund is expected to become insolvent in 2026, two years later than the trustees projected last year, according to an annual report released Friday by Medicare and Social Security Board of Trustees, the Washington Post reports (Montgomery, Washington Post, 5/31).
According to The Hill's "On The Money," the report assumed that Congress will allow a more than 30% cut to Medicare provider payments to go into effect in 2014, which has never happened because lawmakers regularly pass an annual "doc fix" bill to prevent it.
The report also assumed that the across-the-board spending cuts under sequestration -- which include a 2% cut to provider payments -- will remain in effect (Wasson/Baker, "On The Money," The Hill, 5/30).
The report attributed the two-year extension of the Medicare fund in part to a recent trend in slower growth rates for health care spending, the Wall Street Journal reports.
For example, between 2011 and 2012, Medicare spending grew by 4.6%, to a total of $574 billion, compared with annual growth rates of 8% or more for much of the previous decade (Paletta/Rodnofsky, Wall Street Journal, 5/31). Specifically, the report said lower-than-expected spending in "most ... service categories -- especially skilled-nursing facilities" -- have contributed to extending Medicare's solvency (Washington Post, 5/31).
The report predicted that Medicare spending per beneficiary will grow more slowly than the economy through 2017. After 2017, Medicare spending will increase, reaching about four-tenths of a percentage point more than the per capita gross domestic product by 2037.
During a news conference, HHS Secretary Kathleen Sebelius -- one of the six individuals who serve on the board of trustees -- said that per-beneficiary Medicare spending is rising at a historically low rate of 1.7% annually (Pear, New York Times, 5/31). She added that preliminary estimates show the Medicare premiums for 2014 will not increase "a single dime" (Washington Post, 5/31).
However, the report estimated that by 2022 higher-income beneficiaries could see their premiums exceed $500 a month, compared with the $335.70 some currently pay monthly (New York Times, 5/31).
Affordable Care Act's Effect on Medicare
In addition, the report noted that the Affordable Care Act contributed to extending Medicare's solvency, "On The Money," reports ("On The Money," The Hill, 5/30). Specifically, the trustees said ACA provisions aimed at reducing spending for private Medicare Advantage plans played a large role in increasing the lifespan of the trust fund (Washington Post, 5/31).
According to the Washington Post's "Wonkblog," the ACA cut more than $716 billion from Medicare over 10 years, much of which were in the form of reduced reimbursements to hospitals (Kliff, "Wonkblog," Washington Post, 5/31).
During the news conference, Sebelius also touted the ACA's contributions to Medicare savings. Sebelius said the "trustee report confirms that the ACA is continuing to strengthen Medicare and ensure its solvency for future generations ... without eliminating a single guaranteed benefit" (Washington Post, 5/31).
Trustees, Experts, Lawmakers Weigh In on Findings
Despite the favorable projection, the trustees warned that Medicare is unsustainable on its current path and urged Congress to address the issue, the Wall Street Journal reports (Wall Street Journal, 5/31).
Robert Reischauer -- one of the Medicare trustees and former president of the Urban Institute -- said "there is reason to be optimistic" that the slowdown in health spending will continue (New York Times, 5/31). However, he added, "I think such an interpretation would be a mistake" because "Medicare's projections involve a lot of uncertainty" ("Wonkblog," Washington Post, 5/31).
House Ways and Means Committee Health Subcommittee Chair Kevin Brady (R-Texas) said, "This report confirms what Republicans have been saying for some time -- doing nothing is not an option" (Wall Street Journal, 5/31).
Health care analysts expressed concern that the optimistic projections, combined with an improving economy, could dampen congressional efforts to address Medicare spending.
Paul Ginsburg -- president of the Center for Studying Health System Change -- said, "To me, that's the real loss of all this good news." He added, "I don't think anyone except the most extreme person, seeing these trends, thinks the [Medicare] cost problem has been solved. But the way politicians are, it does tend to take the pressure off" (Washington Post, 5/31).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.