Affordable Healthcare Act Saves Eight Years Of Medicare Trust Fund

Editor's Choice
Main Category: Medicare / Medicaid / SCHIP
Article Date: 16 May 2011 - 10:00 PDT


It is not spectacular news overall, but thanks to the Affordable Healthcare Act (ACA), the Medicare's Hospital Insurance (HI) Fund will run out of money in 2024, instead of in 2016. However this is still five years earlier than the trustees projected in last year's annual report.

The deterioration of the trust fund's finances is directly linked to the sluggish economic recovery, according to the trustees, which reported that payroll tax revenues were "considerably lower than projected" and that the general economy was also weaker than expected.

President Barack Obama's administration says the HI Trust Fund would have run dry in 2016 without the reforms contained in the Patient Protection and Affordable Care act, an additional eight years of fiscal stability. At current rates of spending and cost growth, HI Trust Fund assets are projected to cover annual deficits through 2023, with asset depletion beginning in 2024.

Donald Berwick, MD, administrator of the Centers for Medicare & Medicaid Service (CMS) explains:

"This report shows that without the Affordable Care Act, the outlook for the Hospital Insurance Trust Fund today would be much worse. CMS is implementing critical reforms to improve care and reduce costs and improve the overall health of Medicare's beneficiaries and the trust fund."

According to this new report, HI Trust Fund expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years. The trust fund has relied on interest earnings and asset redemption to meet the deficit. In 2010, Medicare tapped the trust fund for more than $32 billion to make up for the shortage.

Joe Baker, president of the Medicare Rights Center continues:

"We must remember that preserving Medicare means not only maintaining the solvency of the trust fund, but also maintaining the value of the benefit and the financial and health protections the program provides to the people it serves. Half of people with Medicare live on incomes below $20,000 per year."

The report pointed out that projecting earlier depletion dates from a previous report is not an uncommon occurrence. A seven-year-shorter projection was reported in 2004 due to similar economic conditions.

The trustees' projection didn't take into account any adjustment to the physician payment formula currently on the books and includes the anticipated payment cut of 29% to take effect Jan. 1, 2012.

Baker added:

"The problem is growing costs in the healthcare sector overall, and shifting costs from one party to another does nothing to address this issue. The ACA achieves savings without cutting benefits or increasing consumer costs, through promoting prevention, paying for quality over quantity, and improving care coordination that can help people with Medicare, including those with multiple chronic conditions, stay healthier. It is solutions like these that we must support to make Medicare stronger."

The trustees also said the financial outlook for Social Security had changed little. They said the Social Security trust fund would be exhausted in 2036, one year sooner than projected in last year's report, and even then, they said, tax revenue would be sufficient to pay three-fourths of promised benefits through 2085.

Click HERE for the full 273 page report.

Written by Sy Kraft
Copyright: Medical News Today
Not to be reproduced without permission of Medical News Today

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