Seven Years and Counting…

Medicare’s Hospital Insurance Trust Fund (HI) will be depleted in seven years — three years sooner than forecast previously, according to the 2018 Annual Report of the Medicare Boards of Trustees. By 2026, Medicare Part A, which covers hospital payments, will be running a $52 billion annual deficit, a gap that will increase rapidly in successive years.

The forecast is based upon implementation of current policy and makes a variety of assumptions regarding employment, growth of payroll tax receipts, and hospital costs that may or may not be on target. However, the trustees note, shorter-term projections are more likely to be accurate than longer-term projects — and seven years is not that far away.

The trustees’ report triggers a formal Medicare funding warning. President Trump must submit to Congress proposed legislation to respond to the warning within 15 days after submission of the FY 2020 budget. Congress is then required to consider the legislation on an expedited basis.

The political problem is that successive Congresses and presidential administrations have kicked the can down the road for so long that any fix will be politically painful. Rather than phasing in remedies over time, allowing a smoother glide path to solvency and making it easier for affected parties to adapt, Congress will have to enact dramatic remedies…. unless it decides to kick the can down the road again, perhaps by funding the Medicare HIĀ  gap with general revenues.

According to the Congressional Budget Office’s most recent forecast, the federal government is on track to be running a $1.076 trillion budget deficit by 2026. Maybe Congress will say, what the heck, what’s another $52 billion, let’s fund the HI deficit with borrowed dollars. But maybe it won’t. If there’s another recession between now and then, the fiscal outlook could be a lot more alarming than it is today.

Winter is coming. Reforming the federal government is hopeless. Virginia’s only hope is maintaining a fiscally robust state and local government.

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5 responses to “Seven Years and Counting…

  1. And … this year Social Security dips into the trust fund for the first time since 1982. In 16 years the trust fund will be gone and benefits will be paid out at 75% of today’s benefits.

    What was it that Margaret Thatcher said about socialism?

  2. According to the W. Post, the main reason for the accelerated depletion date is Trump’s tax cuts, which reduce Treasury revenue, which is reflected in Medicare revenue due to a fixed relationship there. I wonder what the President will say in his proposal to Congress.

    Of course this could and should be fixed, at least so as not to make the situation any worse, not to mention actually restoring the trust fund to stability. Of course this should be yet another opportunity to look at reforming the incentives (or lack of them) in the current Medicare reimbursement scheme. The Republicans, however, seem incapable of doing anything constructive or responsible when the words “government health care” and “tax increase” are attached.

    • Typical WaPo half truth.

      Here’s what the Medicare trustees said:

      HI income is projected to be lower than last year’s estimates due to (1) lower payroll taxes attributable to lowered wages for 2017 and lower levels of projected GDP and (ii) lower income from the taxation of Social Security benefits as a result of legislation. HI expenditures are projected to be slightly higher than last year’s estimate, mostly due to higher-than-expected spending in 2017, legislation that increased hospital spending, and higher Medicare Advantage payments.

      Never, never, never believe anything the Post prints without checking for the whole story. The Post rarely makes up stuff from whole cloth, but it systematically cherry picks data that fits its narrative. It’s disgraceful.

  3. There’s nothing America’s S#^* Newspaper won’t do for higher taxes. The editorial board has the integrity of Pravda. It would rather have economic growth remain at Obama’s pathetic 1.6% for 2016 than see anyone pay lower taxes. Lower payroll taxes due to lower wages means we need faster economic growth. Duh! Even candidate Hillary Clinton said the corporate tax rate was too high.

    Of course, this is the same rag sheet that supported Mark Warner’s tax increases even though they cost Fairfax County taxpayers a net $100 M the first year (increases less new money for K-12 education) and saw 49 localities be able to cut real estate tax support for public schools the next year. Meanwhile Fairfax County residents regularly pay higher and higher real estate taxes and see overcrowded classrooms.

    And the media outlet also supported higher gas taxes without a concomitant increases in overweight truck permit fees even in the face of a UVA study showing overweight trucks caused more than $200 M in annual damages to Virginia roads and bridges. Better taxes be raised so people making $35 K a year can subsidize big trucking companies.

    Of course, the Post supported the increased fees paid by Dulles Toll Road users to fund the Silver Line in the face of tax caps on landowners getting increases in density and hundreds of millions of dollars of unrealized profits from the increased density before they put a shovel in the ground.

    And before Peter howls, I’m not complaining about the lefties there. It’s the almost total lack of personal and intellectual integrity that permeates most, but not all, of anyone who works at the Post. They selectively report “facts” that support their agenda, while repressing “facts” that are contrary. I know lots of people who are pretty far left and operate with integrity. But to work for the Post generally means checking your integrity at the door. If Bezos had integrity, he’d bring back the Ombudsman. He can afford it.

  4. Just wanted to point out (again) that “depleted” does not mean it runs completely out of money. what “depleted” means is that the Trust Fund which has built up excess funding in prior years is now being drawn down to zero but the primary funding mechanism for HI is the FICA tax.

    And yes – like any insurance annuity – public or private – as Jim found out with his long term insurance… or the State of Virginia finds out at budget time – when projections vary from prior predictions – adjustments have to be made.

    In the case of HI – or even Social Security – what it means if the projected funding falls short is that the beneficiaries of the entitlement will likely have to pay more of the cost – as opposed to all taxpayers.

    I consider that a “good” thing. Unlike other funding – when projections fall short – the taxpayer – ends up paying more.

    Let’s also point out that Medicare is the benchmark for benefit payments. Virtually all other insurance – public and private use the Medicare benchmark to set their own reimbursement rates.

    So , yes… those folks who have more than 85K in retirement income will have to fork over more money for their “entitlement”. Boo Hoo.

    The sky is not falling. Every industrialized country on the planet has some form of social security and health care and neither were ever intended to pay all costs… nope… the recipient is expected to pay some share and if you need glasses or dental work or hearing aids or new hips or knees ..some or all is … on you and should be.

    Some folks don’t seem to understand what the phrase “safety net” means… it was never intended to be something that would pay 100% for all you needs or wants. It’s a LIMITED entitlement.

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