Medicare to go belly-up by 2027: Is there a fix?

The Hospital Insurance Trust Fund, which pays for hospital and most institutional services under Medicare Part A, is headed for insolvency. The Congressional Budget Office predicts it will be depleted by 2027.

Fund revenues are expected to fall $494 billion short of spending between 2022 and 2031. If that happens, full payments to providers for services covered under Part A would be delayed, which ultimately could harm the level of care patients receive.

Related: Medicare is burning through funds amid the coronavirus pandemic

The Urban Institute convened a panel of health experts to discuss policy options to address the solvency of Medicare’s Part A trust fund. The possible solutions discussed included:

• Addressing service areas, such as post-acute care and Medicare Advantage, where Medicare payments historically have been relatively high compared with providers’ costs.
• Reforming the way in which Medicare supports graduate medical education and reducing the level of support to more justifiable levels, which could help address solvency issues and achieve other policy objectives, such as supporting the development of a more adequate primary care workforce.
• Varying levels of support to generate savings from prescription drugs.
• Transferring savings from other components of Medicare or from the broader budget into the Part A trust fund.

Some panelists supported broader structural reforms to Medicare, but there was a general recognition that major reforms are unlikely in the near term, given competing priorities and political feasibility. Instead, a combination of accounting, spending and revenue measures to postpone insolvency is the likely path forward to address financial pressures on Medicare, particularly those focused on areas of overpayment to providers, which are unlikely to have direct impacts on beneficiaries.

The feasibility of various options to address solvency may depend on when Congress considers the topic. Some proposals may be more appealing to the public in the wake of the pandemic.

“The challenge of addressing solvency may limit the appetite among both political parties and spur a desire to punt on major reforms as much as possible,” the report concluded. “Several options for Medicare savings would not directly benefit Part A’s financial situation, and so decisions would remain about whether to direct savings to Part A, shore up other parts of Medicare or divert savings to other policy objectives.

“One additional consideration is the time horizon for which Congress seeks to address solvency, specifically, whether it seeks a shorter-term solution or policies that address longer-term financial pressures on Medicare.”

Read more:

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• Average Medicare recipient pays more than $5,000 annually in out-of-pocket costs
•  Taxpayers overpaying billions for Medicare Advantage