Monday, July 17, 2017

It's Here, Too. The 2017 Medicare Trustees' Report

The Medicare Trustees have also released their annual report on the health of Medicare  J Medicare offers some helpful information about how to read the report

The Trustees Report is a detailed, lengthy document, containing a substantial amount of information on the past and estimated future financial operations of the Hospital Insurance and Supplementary Medical Insurance Trust Funds (see the links in the Downloads section below). We recommend that readers begin with the "Overview" section of the report. This section is fairly short, is written in "plain English," and summarizes all the key information concerning the expected financial outlook for Medicare. Substantial additional material is available in the later sections for those wishing to delve more deeply into the actuarial projections.

The report is downloadable as a pdf here. This report runs 263 pages (just a tiny bit shorter than the one from the SSA Trustees).  Again, what do we want to know? We want to know whether Medicare is on sound financial footing. So let's get right to the bottom line (or pages 40-42). Here are the relevant portions of the conclusion in Section II

Total Medicare expenditures were $679 billion in 2016, and the Board projects that they will increase in most future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall. The faster increase is primarily due to the number of beneficiaries increasing more rapidly than the number of workers, coupled with a continued increase in the volume and intensity of services delivered. Based on the intermediate set of assumptions under current law, expenditures as a percentage of GDP would increase from the current 3.6 percent to a projected 5.9 percent by 2091.

The HI trust fund fails to meet the Board of Trustees’ short-range test of financial adequacy. In addition, as in past reports, the HI trust fund fails to meet the Trustees’ long-range test of close actuarial balance.

HI experienced deficits from 2008 through 2015, but annual surpluses are expected from 2016 through 2022 before deficits return for the remainder of the 75-year projection period. The projected trust fund depletion date is 2029, one year later than estimated in last year’s report. Actual HI expenditures in 2016 were slightly lower than the previous estimate. The projections are lower throughout the short-range period due to lower utilization and provider update assumptions. HI taxable payroll in 2016 was slightly higher than previously projected, and projections for HI tax income are lower after 2017 due to slower real-wage growth assumptions.

The HI actuarial deficit in this year’s report is 0.64 percent of taxable payroll, down from 0.73 percent in last year’s report. This result is due primarily to lower-than-estimated spending in 2016 and lower projected inpatient hospital utilization.

The financial outlook for SMI is fundamentally different than for HI due to the statutory differences in the methods of financing for these two components of Medicare. The Trustees project that both the Part B and Part D accounts of the SMI trust fund will remain in financial balance for all future years because beneficiary premiums and general revenue transfers are assumed to be set at a level to meet expected costs each year. However, SMI costs are projected to increase significantly as a share of GDP over the next 75 years, from 2.1 percent to 3.7 percent under current law. The projected Part B costs in this report are slightly higher over the short-range and long-range periods than the comparable projections in the previous report due to higher-than-expected actual spending for outpatient hospital services and physician-administered drugs in 2016 and a methodological change resulting in higher drug spending for patients with end-stage renal disease. The Part D short-range and long-range projections are lower than in past years’ reports, largely due to the increase in drug manufacturer rebates and lower utilization of hepatitis C drugs.

The financial projections shown for the Medicare program in this report reflect substantial, but very uncertain, cost savings deriving from provisions of the ACA and MACRA that lower increases in Medicare payment rates to most categories of health care providers. Without fundamental change in the current delivery system, these adjustments would probably not be viable indefinitely.

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Policy makers should determine effective solutions to the long-range HI financial imbalance. Even assuming that the provider payment rates will be adequate, the HI program does not meet either the Trustees’ short-range test of financial adequacy or long-range test of close actuarial balance. HI revenues would cover only 88 percent of estimated expenditures in 2029 and 81 percent in 2050. By the end of the 75-year projection period, HI revenues could pay 88 percent of HI costs. Policy makers should also consider the likelihood that the price adjustments in current law may prove difficult to adhere to fully and may require even more changes to address the financial imbalance.

The projections in this year’s report continue to demonstrate the need for timely and effective action to address Medicare’s remaining financial challenges—including the projected depletion of the HI trust fund, this fund’s long-range financial imbalance, and the rapid growth in Medicare expenditures. Furthermore, if the growth in Medicare costs is comparable to growth under the illustrative alternative projections, then these further policy reforms will have to address much larger financial challenges than those assumed under current law. The Board of Trustees believes that solutions can and must be found to ensure the financial integrity of HI in the short and long term and to reduce the rate of growth in Medicare costs through viable means. Consideration of such reforms should not be delayed. The sooner the solutions are enacted, the more flexible and gradual they can be. Moreover, the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior. The Board recommends that Congress and the executive branch work closely together with a sense of urgency to address these challenges.

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