The cost of waiting to act on Medicare’s Hospital Insurance Trust Fund
- Collection:
- Health Policy and Services Research
- Contributor(s):
- Bipartisan Policy Center, issuing body.
- Publication:
- Washington, DC : Bipartisan Policy Center, June 2021
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Financial Management Health Policy Insurance, Hospitalization Medicare Medicare Part A United States
- Genre(s):
- Technical Report
- Abstract:
- Medicare is the nation’s largest health insurance program, covering more than 60 million beneficiaries—primarily Americans over age 65, and younger people with certain health conditions. Administered by the federal government and funded by a combination of payroll taxes, general revenues, premiums, and other sources, the program faces significant financial challenges, with expenditures in recent years consistently outpacing dedicated revenue streams. As these funding imbalances have attracted growing attention, a variety of reforms have been proposed to address Medicare’s solvency problems. This paper examines five such proposals, focusing specifically on how each would affect the solvency of the Hospital Insurance (HI) Trust Fund, which finances Medicare Part A (primarily covering inpatient health care services). A February 2021 report by the Congressional Budget Office (CBO) projects that the HI Trust Fund will become insolvent in 2026. Insolvency does not mean that Medicare would no longer be able to pay Part A claims, but rather the trust fund would not have any assets. Medicare draws down on these assets to cover the difference when annual spending exceeds income, and the reserves increase when annual income exceeds spending. Since 2018, annual shortfalls have produced declining assets. Once the trust fund depletes, CBO projects that annual program revenues will cover only about 92% of annual program outlays starting in 2026. At or before that point, Congress would have to act to close the funding gap. If Congress does not act, Medicare payments will be reduced, as the Medicare Board of Trustees has pointed out, “to levels that could be covered by incoming tax and premium revenues.” No statutory provision allows for an automatic transfer from general revenues or any other mechanism to fill the difference absent congressional action.
- Copyright:
- The National Library of Medicine believes this item to be in the public domain. (More information)
- Extent:
- 1 online resource (1 PDF file (32 pages)) : illustrations
- Illustrations:
- Illustrations
- NLM Unique ID:
- 9918333789006676 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/9918333789006676