Kusserow on Compliance: Hospital insurance trust fund will be exhausted by 2026

This year’s Medicare Board of Trustees Annual Report found that the  hospital insurance (HI) Trust Fund will be able to pay full benefits until 2026. The Medicare Program is the second-largest social insurance program in the U.S., with 59.9 million beneficiaries and total expenditures of $741 billion in 2018. By comparison, in terms of size, the Department of Defense entire budget during this period was $686 billion.

The Trustees projected that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.7 percent of Gross Domestic Product in 2018 to 5.9 percent of GDP by 2038, and then increase gradually thereafter to about 6.5 percent of GDP by 2093. The SMI Trust Fund, which covers Medicare Part B and D, had $104 billion in assets at the end of 2018. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who voluntarily enroll. It is expected to be adequately financed in all years because premium income and general revenue income are reset annually to cover expected costs and ensure a reserve for Part B costs.

However, the aging population and rising health care costs are causing projected costs to grow steadily from 2.1 percent of GDP in 2018 to approximately 3.7 percent of GDP in 2038. Part D provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries, as well as premium and cost-sharing subsidies for low-income enrollees.  The President’s Fiscal Year 2020 Budget, if enacted, would continue to strengthen the fiscal integrity of the Medicare program and extend its solvency.

CMS has already introduced several initiatives to strengthen and protect Medicare that includes increasing choice in Medicare Advantage and adding supplemental benefits to the program; and offering more care options for people with diabetes; providing new telehealth services; and lowering prescription drug costs for seniors. CMS is continuing to advance policies to increase price transparency and help beneficiaries compare costs across different providers.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2019 Strategic Management Services, LLC. Published with permission.