Health Groups Mostly Happy With Medicare Trustees Report

WASHINGTON — Healthcare and economic groups were generally pleased with the results of the 2022 Medicare Trustees report, which predicted that the Medicare Hospital Insurance trust fund will likely be adequately funded until 2028 — 2 years longer than last year’s report predicted. However, concerns remained about Medicare’s long-term financial outlook.

“We are encouraged that this report shows an improved outlook compared to last year’s forecast,” said Mary Beth Donahue, president and CEO of the Better Medicare Alliance, a lobbying group for Medicare Advantage plans, in a statement. But “as policymakers consider this report’s findings and actions to secure Medicare in the years ahead, there are critical lessons to be drawn from Medicare Advantage,” she added.

The AARP, a lobbying group for those ages 50 and older, was more circumspect.

The report “send[s] a clear message to Congress: despite the short-term improvement, you must act to protect the benefits people have earned and paid into both now and for the long term,” AARP CEO Jo Ann Jenkins said in a statement. “The stakes are too high for the millions of Americans who rely on Medicare and Social Security for their health and financial well-being.”

Medicare has two separate trust funds, the Hospital Insurance (HI) trust fund and the Supplementary Medical Insurance (SMI) trust fund. The HI trust fund pays for Medicare Part A, which covers inpatient hospital services, hospice care, and skilled nursing facility and home health services following hospital stays; SMI pays for Medicare Part B — which covers visits to doctor’s offices and other outpatient facilities — and Part D, which covers prescription drugs. The HI trust fund is financed through a payroll tax, while SMI is financed roughly 25% by beneficiary premiums and 75% by general revenues.

The six trustees of those funds, as well as of the two Social Security trust funds, include the secretaries of Labor, Treasury, and Health and Human Services, as well as the Social Security commissioner. The other two trustee positions — which are reserved for members of the public — have been vacant since 2015.

Last year’s trustees report predicted that the HI trust fund would stop being fully funded in 2026. This year’s report, released on Thursday, predicted that point would come 2 years later — in 2028. First, “HI income is projected to be higher than last year’s estimates because both the number of covered workers and average wages are projected to be higher,” they wrote. In addition, “HI expenditures are projected to be lower than last year’s estimates in the beginning of the short-range period mainly due to the pandemic, but are projected to become larger after 2023 due to higher projected provider payment updates.”

Over the longer term, “policymakers should determine effective solutions to the long-range HI financial imbalance,” according to the report. “Even assuming that the provider payment rates will be adequate, the HI program does not meet either the trustees’ short-range test of financial adequacy or long-range test of close actuarial balance. HI revenues would cover only 90% of estimated expenditures in 2028 and 80% in 2046.”

The American Medical Association (AMA) remained concerned about Medicare’s future, even with the 2-year delay in the HI insolvency date.

“Medicare trustees acknowledged that patients will face limited access to Medicare-participating physicians because of the long-term growing financial instability of the Medicare physician payment system,” AMA President Gerald Harmon, MD, said in a statement. “The AMA welcomes this recognition and urges Congress to work with physician stakeholders to put the payment system on a sustainable path.”

“Fiscal uncertainty is the only sure thing given the pandemic, statutory payment cuts, growing practice costs, and administrative burdens,” he added. “This report is a wake-up call. We should not hit the snooze button.”

In particular, the AMA highlighted a section on p. 190 of the report that reads in part, “Additional updates totaling $500 million per year and 5% annual bonuses are scheduled to expire in 2025, resulting in a payment reduction for most physicians. In addition, the law specifies the physician payment updates for all years in the future, and these updates do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases … Absent a change in the delivery system or level of update by subsequent legislation, the trustees expect access to Medicare-participating physicians to become a significant issue in the long term.”

The outlook for the SMI trust fund looks much rosier because it’s financed differently than the HI trust fund, according to the trustees.

“The trustees project that both the Part B and Part D accounts of the SMI trust fund will remain in financial balance for all future years because beneficiary premiums and general revenue transfers are assumed to be set at a level to meet expected costs each year,” they said. However, they added, “SMI costs are projected to increase significantly as a share of GDP over the next 75 years, from 2.4% to 4.5% under current law.”