Medicare - Is It Going Bankrupt Or Not?

A recent blog post dated Dec. 5, 2016 on the Center on Budget Policy Priorities by Paul N. Van de Water (Senior Fellow Director, Policy Futures) addressed a common false myth about the financial footing of Medicare and that it was going bankrupt. However he wrote that Medicare is not running out of money.

The Center on Budget Policy Priorities writes: 
"Medicare’s Hospital Insurance (HI) trust fund will remain solvent - that is, able to pay 100 percent of the costs of the hospital insurance coverage it provides - through 2028, the program’s trustees wrote in their latest report. Even after 2028, when the HI trust fund is projected for depletion, incoming payroll taxes and other revenue will still cover 87 percent of Medicare hospital insurance costs. 

Policymakers will need to close this shortfall by raising revenues, slowing the growth in costs, or most likely both, as they’ve done many times before.  But Medicare’s hospital insurance program will not run out of all financial resources and cease to operate after 2028, as 'bankruptcy' suggests.

The 2028 date doesn’t apply to Medicare coverage for physician and outpatient costs or to the Medicare prescription drug benefit, neither of which faces insolvency. They’re financed through the program’s Supplementary Medical Insurance (SMI) trust fund, which consists of two separate accounts - one for Medicare Part B, which pays for physician and other outpatient health services, and one for Part D, which pays for outpatient prescription drugs. Premiums for Part B and Part D are set each year at levels that cover about 25 percent of costs; general revenues pay the remaining 75 percent. Therefore, SMI can’t run short of funds.”1

To read the entire blog post from Center on Budget Policy Priorities (CBPP) click on the web link below:

1. Source:
Paul N. Van de Water (Senior Fellow Director, Policy Futures) Dec. 5, 2016

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