Medicare‘s Hospital Insurance trust fund will run out of funding in 2028, according to a report issued by Medicare trustees in June 2022. This is a two-year extension from the prior projection, but according to analysts, it is still not welcome publicity, and the administration needs to stop dithering. This is what you ought to know.
If the Medicare Hospital Insurance trust fund gets exhausted, Medicare Part A will not collapse. Beginning in 2029, however, the program’s revenues will be insufficient to pay all operational expenses, with a shortfall of approximately 10%.
As Matthew Fiedler, a senior fellow with the USC-Brookings Schaeffer Initiative for Health Policy, explains, “This portion of the Medicare program will be unable to make payments to health care providers and health insurers that are due, and these payments will be increasingly delayed over time.”
Medicare’s Hospital Insurance trust fund does not support the entirety of Medicare; instead, it finances Medicare Part A, hospital insurance. Medicare Part B, which covers doctor visits and outpatient treatment, and Medicare Part D, which covers prescription drugs, are primarily financed from patient premiums and general government revenues.
The government could respond in various ways, including adjusting service coverage and redistributing money. Here are some alternatives:
Switch Services
Some experts have argued that the government may move specific post-acute treatments, such as physiotherapy or nurse management following a hospital stay, from Part A to Part B.
Dr. Mark McClellan, Robert J. Margolis Professor of Business, Medicine, and Policy at Duke University and holder of a Ph.D. in economics, explains, “This improves the appearance of the Part A trust fund by removing some of the charges from the books.” However, this does not significantly alter the overall cost or durability of the program.
Some post-acute services that are 100% covered under Part A may be subject to Part B, eligible for a deduction and 20% coinsurance for Medicare beneficiaries unless the benefactor does have a Medigap or Medicare Advantage policy that covers the costs.
Modernize
Before the 2006 introduction of Medicare Part D, there were fewer expensive specialty medications on the market. Currently, the government foots the majority of the expense for expensive medications. Reducing prescription expenses and applying the savings to the Part A trust fund is another possibility.
The current proposal in Congress would help Medicare recipients spend less on prescription medications and reduce the cost of certain expensive drugs over time.
As McClellan explains, “The Senate measure includes a significant update of Medicare’s drug benefit to offer full insurance for Medicare beneficiaries having high medication expenditures and to encourage Medicare’s drug programs to bargain more actively with drug makers.”
Reduce Payments
According to Joseph Antos, Senior Fellow, and Wilson H. Taylor, Scholar in Healthcare and Pension Policy at the American Enterprise Institute, Medicare payments to some or all Part A providers could be reduced soon.
Antos wrote in an email, “Congress has achieved this already and can do it again, especially if this is coupled with another change that comes into effect during nine or ten years’ time.” (The Congressional Budget Office produces en-year cost projections, so a nine- or ten-year adjustment schedule “maximizes scoreable savings while signaling to providers that the reduction is temporary,” according to Antos.)
Antos said that this strategy would have minimal effects on beneficiaries. At the same time, it could decrease access to some specialists or result in some operators adding services not provided by Medicare to enhance profits.
Move Money
The government will most likely authorize a one-time injection of public funds into the Medicare trust fund. Antos stated, “I could easily envision them saying, ‘Temporarily, for five years, we will sanction an injection from general resources to supplement it.'”
He stated that the country’s debt would keep rising if this occurred. “That would not affect recipients.” But it would have consequences for their children.
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