Medicare extends solvency to 2029, avoids cuts

Medicare's hospital insurance trust fund will not be exhausted until 2029, allowing the program to avoid cuts from an Independent Payment Advisory Board, according the Medicare Trustees annual report.

This extends the program's solvency for one year beyond last year's projections, which estimated the HI trust fund would be depleted by 2028. Medicare's HI trust fund covers Part A costs, including those associated with hospital stays and post-acute treatment, such as home health, skilled nursing facilities or hospice care.

HHS credits lower than expected spending in 2016, and lower than expected inpatient hospital utilization and hospital insurance deficit in 2017 for the extension. Total Medicare expenditures in 2016 totaled $678.7 billion, with income posted at $710.2 billion.

"Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation," the trustees wrote. "Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers."

The trustees estimate Medicare costs will grow from 3.6 percent of GDP in 2016 to 5.6 percent in 2041 to 5.9 percent in 2091, due to baby boomers aging into retirement.

The report also notes Medicare physician payment rates under the Medicare Access and CHIP Reauthorization Act could become an issue in the long-term because they are not tied to underlying economic conditions or cost increases. If nothing changes, this may cause physicians to leave Medicare, the report notes.

 

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