Medicare Trustees released their annual report on Wednesday and once again predicted that the Medicare Part A trust fund will be insolvent in 2026. But the COVID-19 outbreak could cause the funds to run dry before then.
The 2020 annual report provides the financial outlook for Medicare and like last year’s report, determined that the Hospital Insurance Trust Fund, which covers inpatient hospital services, will be depleted in six years.
Trustees have been sounding the alarm about the financial health of Medicare Part A for years. It hasn’t been financially solvent since 2003. In 2019, they said, the costs exceeded income by $5.8 billion. They project deficits in all future years until the trust fund is depleted in 2026.
However, the Supplementary Medical Insurance Trust Fund, which covers Medicare Part B and D, is adequately financed over the next 10 years and beyond because income from premiums and general revenue for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies. Part B covers physician visits, outpatient hospital services, and some home health services for individuals who have voluntarily enrolled. Part D provides subsidized access to voluntary drug insurance.
But the report doesn’t account for the full impact of COVID-19, which has caused an economic downturn and has stressed the entire health care system. Medicare enrollees are among those most at risk for becoming seriously ill from the deadly virus and the program will take a big financial hit for the costs to cover treatment.
The full impact of the global health pandemic on Medicare will be included in next year’s report and it’s likely the financial picture will be bleak.
“Accounting for the pandemic, the actual outlook is likely to be far worse,” said the Committee for a Responsible Federal Budget in a preliminary analysis of the Trustees report. “COVID-19 is likely to both increase hospital insurance spending and depress payroll tax revenue, substantially advancing the date of Medicare insolvency.”
Treasury Secretary Steven Mnuchin, said in a statement that the Trump administration is “working around the clock to mitigate any potential long-term negative economic effects of the pandemic, and position the economy once again for strong growth.”