Medicare trustee's report shows program will run out of money earlier than expected

June 17, 10:08 AMHealth Care ExaminerSheila Guilloton

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Treasury Secretay Timothy F. Geitner is also Managing
Trustee of the Medicare Trust Funds

On May 12, 2009 the Board of Trustees of Medicare sent their annual report to Congress. This report projects that the trust fund for Medicare Part A is not adequately financed for its needs over the next decade.

Citing the poor economic conditions and lower payroll tax income, the Trustees now project that the funds for Medicare Part A will run out in 2017, two years earlier than originally projected.

Medicare Part B appears to be adequately funded at the moment. However, the report warns that Congressional overrides of scheduled physician fee reductions and restricting premium increases for most participants will jeopardize the solvency of the Part B trust fund.

Medicare Part A is the hospital insurance component of Medicare. It pays for hospital, skilled nursing facilities, and hospice care.  It is this part of Medicare that is most in jeopardy, The report of the Trustees concludes that “the Health Insurance fund does not meet the short range test of financial adequacy, and fund assets are projected to be exhausted by 2017.”

The Health Insurance fund also fails the long range test of financial adequacy. Without both decreased expenditures and increased revenues, the whole system will fail.

Medicare Part B or the Supplementary Medical Insurance helps pay for physician services, out patient services and home health care. Participation in Part B is funded by premiums paid by the participants who enroll voluntarily. The Supplementary Medical Insurance trust fund is adequately funded over the next 10 years, unless Congress overrides premium increases and stops scheduled cuts to physicians. Congress has overridden the funding necessary to keep Part B solvent every year for the past 7 years.

Seniors are already unhappy with the increasing premiums for Medicare Part B. Beginning in 2007 under the provisions of the Medicare Modernization Act, the premium paid for Medicare Part B is adjusted based on income. It is estimated that only about 5% of the participants enrolled in Medicare Part B will be subject to the higher premium amounts.

The conclusions of the Medicare Trustee is fairly dire. The report concludes that there is a “critical need for timely and effective action to address Medicare’s financial challenges.” Reforms are need not just to our health care system but also to our Medicare system.