CBO: Medicare's hospital trust fund will be exhausted in 2026

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The Congressional Budget Office has changed its prediction as to when Medicare's hospital trust fund will run dry.

Payments made to hospitals by Medicare are made from two trust funds: the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund. The HI Trust Fund is used to make payments to hospitals under Part A of the Medicare program, and the SMI Trust Fund is used to make payments for outpatient services and prescription drugs under Medicare Parts B and D.

The HI Trust Fund, which is the larger of the two, had a balance of $195 billion at the end of 2015, according to the CBO.

In 2015, the CBO projected the HI Trust Fund would remain solvent through 2030, according to a report by The Advisory Board Company. However, in the CBO's report released Monday, it narrowed that timeframe and projected the trust fund will be exhausted in 2026.

Without legislative action to address shortfalls, the HI Trust Fund is not the only trust fund that will be exhausted in the next decade. The CBO projected Social Security's Disability Insurance Trust Fund will be depleted in 2022 and the Highway Trust Fund will be exhausted in 2021.

Unlike the HI fund's income, most of the income to the SMI fund does not come from a specified set of revenues collected from the public. "Rather the amounts credited to those accounts from the general fund of the Treasury are automatically adjusted to cover the differences between the program's spending and specified revenues," according to the CBO. Therefore, the balance in the SMI Trust Fund cannot be depleted.

More findings from the CBO's recent report can be found here.

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