Medicare isn’t going broke, but don’t celebrate just yet


Medicare's fiscal health is improving, but it still needs some saving. (Flickr)

Once again, it's the time of year when Washington confronts the same existential question: Is Medicare going broke?

Today marks the annual release of the Medicare trustees' report, when those guarding the health-care program's finances make their best guesses about Medicare's fiscal future. This year's verdict: Medicare's hospital insurance trust fund will be solvent through 2030, which gives the program four more years of solvency than projected in the trustees' 2013 report. It's also 13 years later than the prediction issued by the trustees just before passage of the Affordable Care Act in 2010.

The Medicare trust fund is backed by payroll taxes, so today's report essentially tells us for how long the trustees expect those revenues will be sufficient to foot the entire bill for Medicare's hospital bills. The trust fund is just one part of Medicare, though. It doesn't include doctors' visits and other medical services, which are covered by general revenues and beneficiaries' premiums.

There's other good news in the trustees report. Per capita spending in the program grew just 0.8 percent over the past four years. Medicare premiums in the program covering medical services are expected to remain the same as they were in 2013 and 2014.

The insolvency target for Medicare's trust fund has been shifting a bit over the past few years. Just three years ago, the trustees said the trust fund would reach insolvency in 2024 — five years earlier than their previous forecast. Last year, the trustees moved their insolvency projection back to 2026. They're now moving the target back to 2030 partially because of ACA changes and projections that per capita health-care spending will, at least in the short term, grow slower over the next several years.

Now, some caution. There's a whole lot of uncertainty in what's behind the slowdown in health-care spending in recent years, whether it's due to the sluggish economy or structural changes in the health-care system. How long can the slowdown last? "No one knows," said Charles Blahous, Medicare's Republican public trustee.

And the trustees' report highlights the truly difficult task of predicting Medicare's future:

Projections of Medicare costs are highly uncertain, especially when looking out more than several decades. One reason for uncertainty is that scientific advances will make possible new interventions, procedures, and therapies. Some conditions that are untreatable today will be handled routinely in the future. The institutions through which care is delivered will evolve, possibly becoming more efficient. While most health care technological advances to date have tended to increase expenditures, the health care landscape is shifting. No one knows whether these future developments will, on balance, increase or decrease costs.

Another source of uncertainty for Medicare's future is the ACA itself. The law calls for $415 billion in reduced payments to care providers, while at the same time trying to encourage providers to adopt care models that cut costs and provide better outcomes. Whether care can be truly reformed is a question that Medicare's best prognosticators still can't answer, but they said recent signs have been encouraging.

"Trustees are hopeful that U.S.health care practices are in the process of becoming more efficient as providers anticipate a future in which the rapid cost growth rates of previous decades, in both the public and private sectors, do not return," they wrote. However, they also don't want policymakers to get complacent in light of today's improved projections.

"Some might be tempted to conclude from these good news trends that Medicare may be healing its financial maladies all by itself and that no further action will be needed," said Robert Reischauer, the Democratic public trustee. "That would not be a prudent conclusion."

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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