I was reading an informative KFF article by Juliette Cubanski and Tricia Neuman entitled "FAQ’s about Medicare Financing and Trust Fund Solvency." So I thought I would briefly share some brief bullet points of their information they provided.
- Medicare spending often plays a major role in federal health policy and budget discussions, since it accounts for 21% of national health care spending and 12% of the federal budget.1
- Funding for Medicare comes primarily from general revenues, payroll tax revenues, and premiums paid by beneficiaries. Other sources include taxes on Social Security benefits, payments from states, and interest. The different parts of Medicare are funded in varying ways.1
- Payroll taxes accounted for 88% of Part A revenue in 2019.
Recent attention has focused on one specific measure of Medicare’s financial condition – the solvency of the Medicare Hospital Insurance (HI) trust fund, out of which Medicare Part A benefits are paid – because the HI trust fund is projected to be depleted in 2026, just five years from now.1 - The solvency of the Medicare Hospital Insurance trust fund, out of which Part A benefits are paid, is a common way of measuring Medicare’s financial status, though because it only focuses on the status of Part A, it does not present a complete picture of total program spending. Medicare solvency is measured by the level of assets in the Part A trust fund. In years when annual income to the trust fund exceeds benefits spending, the asset level increases, and when annual spending exceeds income, the asset level decreases. This matters because when spending exceeds income and the assets are fully depleted, Medicare will not have sufficient funds to pay hospitals and other providers for all Part A benefits that are provided in a given year, In the 2020 Medicare Trustees report, the actuaries projected that assets in the Part A trust fund will be depleted in 2026, just five years from now. A more recent projection from the Congressional Budget Office also estimated depletion of the HI trust fund in 2026.1
- So while some describe the trust fund as heading toward “bankruptcy” or “going broke”, it is important to note that the Medicare program will not cease to operate if assets are fully depleted, because revenue will continue flowing into the fund from payroll taxes and other sources. Based on data from Medicare’s actuaries, in 2026, Medicare will be able to cover 94% of Part A benefits spending with revenues plus the small amount of assets remaining at the beginning of the year, and just under 90% with revenues alone in 2027 through 2029.1
Click the web link below to read the entire article:
https://www.kff.org/medicare/issue-brief/faqs-on-medicare-financing-and-trust-fund-solvency/
1. Source: KFF article entitled: "FAQs on Medicare Financing and Trust Fund Solvency" by Juliette Cubanski and Tricia Neuman
https://www.kff.org/medicare/issue-brief/faqs-on-medicare-financing-and-trust-fund-solvency/
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