Medicare Trust Fund Sees A Second Year of Improvements 

Trustees for the Medicare Trust Fund reported a second straight year of improvements in the Medicare hospital fund that pays for inpatient hospital treatment.

In their annual report for 2023, issued on March 31, Part A Hospital Insurance (HI) fund might now run out of money in 2031, three years later than the trustees had predicted. This trust fund could still cover 89 percent of Medicare expenses using tax revenues.

Additionally, the trustees expect that the Medicare Part B payment, which covers outpatient services, will increase to $174.80 in 2024, a $9.90-per-month increase from the 2023 rate of $164.80. This fall, the real 2024 premium will be determined.

The trustees also disclosed their estimates for the Social Security program, projecting the Trust funds that provide retirement, survivor, and disability payments will run out of money by 2034, a year sooner than expected in the trustees’ 2024 report.

Both Social Security and Medicare trustees’ reports highlight the need for long-term funding, even though both programs are financially strong today, and Congress must act to find solutions to ensure that Social Security and Medicare will be around for the next generation and beyond.

According to Jo Ann Jenkins, AARP CEO, Medicare is the primary or only source of health care for most elderly Americans. Employees accrue benefits by contributing to both programs throughout their employment, with the assurance that these systems will provide for them when they retire.

Here is why the fund is doing slightly better than expected:

Spending cuts contribute to a brighter outlook.

The better health of the Medicare hospital fund is primarily attributable to a decline in healthcare expenditures and an increase in contributions resulting from an increase in the number of employees and their income. The Medicare payroll tax is the principal source of funding for the HI trust fund.

During a call with reporters on March 31, administration officials explained that the lower projected healthcare spending is due to several factors, including the fact that during the COVID-19 pandemic, many of the Medicare beneficiaries who passed away were being treated for other serious illnesses and thus used more health care resources. According to authorities, surviving Medicare recipients had fewer comorbidities (two or more illnesses or disorders).

Medicare Advantage plans

In addition, spending has decreased since more Medicare recipients who are also Medicaid users have enrolled in Medicare Advantage plans, saving the program money because Medicare Advantage companies spend less on dual-eligible individuals. Also, an increasing number of Medicare patients receive some treatments, particularly joint replacement, performed as an outpatient rather than as inpatient, saving the hospital trust fund money.

Changes in the law

According to the trustees, the new law resulting in lower prescription medicine prices will also help the program’s financial health. According to the research, the passage of the Inflation Reduction Act of 2024 has had a substantial impact on Medicare predictions. Prescription drug provisions in the new health care law contain extensive provisions that will curtail price growth, according to administration officials, including Medicare being able to negotiate prescription drug prices, penalties for drug companies that raise prices above the rate of inflation, and changes to the Medicare Part D prescription drug plan, including a $2,000 cap on out-of-pocket expenses,

Congress needs to act.

Notwithstanding the more optimistic near-term estimates for the Medicare trust fund, the trustees urge Lawmakers to take action to strengthen the program’s long-term finances. The analysis indicates that the fund will run out of money in less than ten years.

The study states the financial estimates in this analysis highlight the need for significant measures to meet Medicare’s financial issues. Current legislative forecasts imply that Medicare still faces a significant budget gap requiring more legislation. Any viable measure should be passed as soon as possible to minimize the impact on recipients, providers, and taxpayers.