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Medicare is Strong and Built to Last

Last week’s Medicare Trustees’ report predicts the Part A Hospital Insurance (HI) trust fund will be partially depleted in 2026. This is the same as last year’s projection, and three years earlier than in 2017—the last report issued before the GOP tax bill took effect.

This is not a coincidence. The 2017 tax bill directly cut funding for the Part A Trust Fund by significantly reducing one of its primary revenue streams—the taxation of Social Security benefits. It also caused some of the projected growth in Part A expenditures. By zeroing out the Affordable Care Act’s individual mandate, the tax bill also increased the number of uninsured—driving up Medicare hospital payments for uncompensated care. Higher spending projections can also be attributed to the tax bill’s repeal of the Independent Payment Advisory Board, which would have helped to control Medicare spending if the growth rate exceeded certain target levels.

These projections are not irreversible. The Trustees note that lawmakers could extend the Trust Fund through a mix of program and tax changes, and that absent any policy interventions, Medicare would still be able to pay 89% of hospital benefits in 2026. While this shortfall needs to be addressed by slowing cost growth, raising revenues, or both, the program—which is partly financed by payroll taxes—will continue to receive funding and to operate beyond 2026.

Importantly, focusing only on Part A doesn’t tell the whole story. Millions of older adults and people with disabilities also rely on Parts B and D for needed outpatient care and prescription drug coverage. Because these parts of Medicare are funded through a combination of annually-adjusted general revenue amounts and beneficiary premiums, they are able to meet expected costs each year.

The Medicare Trustee’s report underscores what we already know: Medicare is strong and built to last. We urge lawmakers to pursue commonsense reforms—like reversing the tax bill’s troubling trajectory, reigning in high prescription drug prices, and eliminating Medicare Advantage overpayments—to ensure it stays that way.

Read the 2019 Medicare Trustees Report

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