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No Change in Medicare Solvency Date, Trustees Say No Change in Medicare Solvency Date, Trustees Say

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Health Care / HEALTH CARE

No Change in Medicare Solvency Date, Trustees Say

Geithner: releases Medicare Trustees report.(Manuel Balce Ceneta/AP)

April 23, 2012

The Medicare Trust Fund will run out of money in 2024, the federal government told Congress on Monday in its annual Medicare Trustees report.

"Medicare's Hospital Insurance Trust Fund will have resources sufficient to cover benefits until 2024, the same year that was projected in last year’s report," Treasury Secretary Timothy Geithner said  in a statement.

The annual report from the Medicare trustees — a board that includes Geithner and Health and Human Services Secretary Kathleen Sebelius — projects the time when Medicare expenses will be higher than what it collects in taxes.


"Hospital insurance expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years," HHS said in a statement.

According to the Congressional Research Service, the Medicare trustees have predicted the program would become insolvent almost every year since they started issuing reports in 1970. 

In one section of the report Richard Foster, who is the independent actuary for the Centers for Medicare and Medicaid Services, sounded a warning on the 2010 health reform law, his third such warning in three years.

“While the Affordable Care Act makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range,” Foster wrote in the report. “Without unprecedented changes in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services.”

The trust funds are financial accounts within the Treasury Department that serve as a sort of clearinghouse for revenues that come in and expenditures that are paid out. Medicare has two different trust funds, one for hospitals, skilled nursing facilities and hospice, and another primarily for physicians.

The report notes that its primary analysis depends on some unrealistic expectations. It assumes that Congress will not override a physician payment formula that would mean dramatic pay cuts for doctors. It also assumes that the 2010 health care reform law's provisions will work as planned and without changes from Congress.

"The Trustees believe that this outcome, while plausible, will depend on the achievement of unprecedented improvmeents in health car eprovider productivity," it says.

The report also assumes that across-the-board cuts will be imposed as part of the budget sequester next year. The Budget Control Act of 2011 requires a 2 percent reduction in Medicare rates.

Sebelius said the report's conclusions support the Obama administration's approach to Medicare reform. The cost-savings achieved through the health care reform law, she said at a press conference, are proof that Medicare can be preserved without an overhaul. 

"Today's report shows that this approach can work," she told a news conference. “Without the health care law, the hospital insurance trust fund would be exhausted in 2016, just four years from now,” 

That message is at odds with the conclusions of the report itself, which urges big reforms to ensure that Medicare's trust funds will not run out. The program is under increasing pressure not just because health care prices are rising, but also because the retirement of the Baby Boom generation means the population of beneficiaries has begun to explode and will continue to rise.

"Consideration of further reforms should occur in the near future," the report says. "The sooner solutions are enacted, the more flexible and gradual they can be."

Geithner made a case for implementing the president’s 2011 deficit reduction plan, which would reduce federal health spending by giving an independent Medicare financing board tougher spending goals, reducing drug reimbursements, and asking wealthy seniors to pay more for their care.

“At the same time, adjustments to Social Security and Medicare must be balanced and even handed. We will not support proposals that sow the seeds of their destruction in the name of reform, or that shift the cost of health care to seniors in order to sustain tax cuts for the most fortunate Americans,” Geithner said.

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