The portion of the program that is in danger of running out of funds early is the smaller Part A (HI), which covers inpatient hospital services, skilled nursing facilities, home health care and hospice care. (Photo: Shutterstock)
The Trustees' Report for 2018 on the financial health of Medicare hit the public with a headline that implied the program to be in mounting financial trouble.
But the truth is more complex and less grim, according to a brief from the Center for Retirement Research at Boston College.
The brief finds that although the headline said that the program's Hospital Insurance trust fund will run out of money in 2026, three years earlier than was estimated last year, the program is actually in better financial shape than it was 10 years ago.
The portion of the program that is in danger of running out of funds early is the smaller Part A (HI), which covers inpatient hospital services, skilled nursing facilities, home health care and hospice care — and only amounts to about a third of the whole Medicare program.
Part A gets its funding chiefly from a payroll tax of 2.9 percent, of which employees pay half and employers pay the other half.
And it's the HI trust fund that's expected to run out of money sooner than previously expected—not the larger, Supplementary Medical Insurance program.
SMI is composed of Medicare Part B, physician and outpatient services, and Part D, prescription drugs.
SMI's funding comes from general revenues and participant premiums, and is adequately funded—although beneficiaries and general revenues will be forking over a larger part of their cash to keep it that way.
Of course, that doesn't mean that Medicare doesn't face problems, but the situation isn't quite as dire as that headline may have implied.
Medicare has to operate within the “very expensive U.S. health care system,” which in itself is a pretty big handicap. It also requires its beneficiaries to pay “substantial” out-of-pocket costs, the brief says, as well as having “some serious gaps in insurance protection.”
But even if Congress phases out some of the cost controls in recent legislation, it adds, Medicare is still better off financially than it was a decade ago.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
