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The Hospital Insurance Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits only until 2028, according to a new report from the Trustees of the Social Security and Medicare trust funds.
While that’s two years later than was originally reported last year, the fund’s reserve will run dry at that point, and continuing total program income will be sufficient to pay 90% of total scheduled benefits.
Medicare and Social Security are both facing long-term financing shortfalls under currently scheduled benefits and financing, the trustees found. The cost of both programs will grow faster than gross domestic product through the mid-2030s, primarily due to the rapid aging of the US population.
Medicare costs are projected to grow faster than GDP through the late 2070s due to expected increases in the volume and intensity of services provided.
WHAT’S THE IMPACT?
The Supplemental Medical Insurance (SMI) Trust Fund, meanwhile, is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.
Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries, the trustees found.
And for the sixth straight year, they’re issuing a determination of projected excess general revenue Medicare funding, as is required by law Whenever annual tax and premium revenues of the combined Medicare funds will be below 55% of projected combined annual outlays within the next seven fiscal years.
Under the law, two such consecutive determinations of projected excess general revenue constitute a “Medicare funding warning.” Under current law and the trustees’ projections, such determinations and warnings will recur every year through the 75-year projection period.
THE LARGER TREND
The report determined that lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare, but they should take action sooner rather than later. That’s to give them a broader range of solutions and more time to phase in changes so the public has adequate time to prepare, but the report didn’t specify what policy options would be most appropriate.
By law, there are six trustees, four of whom serve by virtue of their positions in the federal government: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two trustees are public representatives appointed by the president, subject to confirmation by the Senate. The two public trustee positions have been vacant since 2015.