What’s behind the optimism surrounding the Medicare trust fund?

The Medicare Hospital Trust Fund is projected to stay solvent until 2036 – five years longer than last year’s prediction, according to the 2024 Medicare Trustees Annual Report.

What’s behind this optimism was discussed during a recent webinar by the American Academy of Actuaries.

Medicare has become a $1 trillion federal program, ranking up there with the Department of Defense and the Social Security program, said Paul Spitalnic, director and chief actuary with the Centers for Medicare and Medicaid Services.

Medicare Part A is funded mainly through a tax on covered earnings while Medicare Parts B and D are funded through beneficiary premiums.

The two main takeaways from the 2024 Medicare Trustees Report are, Spitalnic said, are:

1. Projected expenditures for 2024-33 were 4.7% lower than they were in the trustees’ 2023 report.
2. Projected income for 2024-33 was 3.2% higher than it was in the trustees’ 2023 report. Spitalnic credited this higher income prediction to economic growth. “More people working and higher covered wages led to higher payroll taxes,” he said.

Since the COVID-19 public health emergency ended, Medicare fee for service per capita spending has stabilized, Spitalnic said. In addition, morbidity rates have improved in the Medicare-age population since COVID-19. “Those who survived COVID-19 are less likely to be high users of health care,” he said.

Home health spending in 2023 was significantly lower than expected prior to the pandemic, and the end of the public health emergency meant the end of the waiver regarding the three-day inpatient stay requirement to receive skilled nursing services under Medicare. Spitalnic said these trends will impact Medicare cost projections in the future.

Looking at Medicare over the past 40 years, “you can see the program has truly evolved,” Spitalnic said. In 1983, Medicare mainly paid for inpatient services. By 2023, managed care made up nearly half of Medicare spending, with inpatient services and Part D drugs combining for about 25% of covered services.

“The program is going to evolve over time,” he said. “The majority of these changes were in response to legislative changes. We don’t know exactly how the program will change over time.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on X @INNsusan.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].