Medicare: ‘We have a lot of work ahead of us’

Tuesday, April 24, 2012

WASHINGTON – Medicare should remain solvent in the short-term, but its future is still unknown, according to the annual Medicare Trustees Report released this week.

Medicare is expected to remain solvent until 2024, the same year shown in last year’s report.

“The Trustees Report tells us that while Medicare is stable for now, we have a lot of work ahead of us to guarantee its future,” stated Acting CMS Administrator Marilyn Tavenner in a press release.

In 2011, Medicare covered 48.7 million people: 40.4 million aged 65 and older, and 8.3 million disabled. Total expenditures were $549.1 billion, and total income was $530 billion.

The trustees project that, under current law, expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, they will increase from 3.7% in 2011 to 6.7% by 2086.

If lawmakers continue to override the statutory decreases in physician fees and if the reduced price increases for other health services under Medicare are not sustained and do not take full effect in the long term, then Medicare spending would, instead, represent roughly 10.4% of GDP in 2086, according to the report.

The trustees project that the Hospital Insurance (HI) tax income and other dedicated revenues will fall short of HI expenditures in all future years under current law. The HI trust fund does not meet either the trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.

The Part B and Part D accounts in the Supplementary Medicare Insurance (SMI) trust fund are adequately financed under current law, since premium and general revenue income are reset each year to match expected costs, according to the report. Such financing, however, would have to increase faster than the economy to match expected expenditure growth under the current law.

CMS stated that, without the Affordable Care Act (ACA), which provides tools to control costs over the long run, the trust fund would expire in 2016.

To read the report: