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Trustees: Medicare to Go Broke in 2024 Trustees: Medicare to Go Broke in 2024

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Trustees: Medicare to Go Broke in 2024


President Obama and Heath and Human Services Secretary Kathleen Sebelius. Medicare Trustees say the program will be insolvent five years earlier than expected, but Obama's health care law will help.(SAUL LOEB/AFP/Getty Images)

Medicare's hospital insurance trust fund will become insolvent in 2024, five years sooner than previously estimated, largely due to the sluggish economy, the Social Security and Medicare Trustees report.

Medicare costs will continue to grow substantially, from a 3.6 percent share of the economy in 2010 to 5.5 percent by 2035, the trustees project in their annual report. But they say reforms in last year's health care law can help.


"We have heard in today's Medicare Trustees report that there is no question we've strengthened Medicare," Health and Human Services Secretary Kathleen Sebelius told reporters. "But there is still work to be done."

Sebelius said that the health law has worked to slow the rate of spending on Medicare beneficiaries compared to GDP.

"Last year, the president and Congress took a timely first step by enacting the most significant entitlement reform in decades," Treasury Secretary Timothy Geithner said in a statement. "But we must go beyond the Affordable Care Act and identify additional reforms."


Medicare has spent more than it has taken in every year since 2008. Last year, Medicare took in $32 million from its trust fund to make up for those shortfalls.

In 2010, the trustees reported that the Medicare trust funds would go into the red in 2029.

Medicare's hospital trust fund is funded by payroll taxes, and thus is more susceptible to the ups and downs of the economy.

Total Medicare expenditures were $535 billion in 2010 and are projected to increase in future years at a somewhat faster pace than workers' earnings or the economy overall, the trustees said.


The trustees’ snapshot of Medicare, however, assumes that the 29 percent physician pay cut will go into effect in January, 2012. Congress has stepped in every year since 2003 to ensure that those cuts don’t happen, and they are expected to do so again.

A senior administration official who spoke to reporters Friday said that the solvency dates would not be impacted by the so-called physician fix. Still, the Centers for Medicare and Medicaid Services are preparing to release an alternative fiscal scenario that assumes the expected cuts are overturned.

Medicare covered 47 million seniors last year, a little more than half of whom were enrolled in private health plans under Medicare Advantage.

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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.



This article appears in the May 13, 2011 edition of National Journal Daily PM Update.

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