The Washington PostDemocracy Dies in Darkness

A crucial Medicare trust fund will run out three years earlier than predicted, new report says

Health and Human Services Secretary Alex Azar is one of the trustees overseeing Medicare. (Melina Mara/The Washington Post)

The financial future of the part of Medicare that pays older Americans’ hospital bills has deteriorated significantly, according to an annual government report that forecasts that the trust fund will be depleted by 2026 — three years sooner than expected a year ago.

The report, issued Tuesday by a quartet of Trump administration officials who are trustees for Medicare and Social Security, reveals that policy changes ushered in by the president and the Republican Congress are weakening the financial underpinnings of the already fragile insurance program.

According to the report, less money will be flowing into the hospital-care trust fund in part because the tax law passed this year will cause the government to collect less in income taxes. In addition, lower wages last year will translate into lower payroll taxes.

As revenue slips, hospital expenses will increase, the report says. A senior government official who briefed reporters on it said that part of that increase is because the tax law will, starting next year, end enforcement of the Affordable Care Act’s requirement that most Americans carry health insurance. As a result, hospitals are predicted to have more uninsured patients, in turn requiring the Medicare program to pay more for such uncompensated care.

Unlike in previous years going back decades, none of the trustees — three Cabinet members and the acting Social Security commissioner — attended the report’s release at the Treasury Department.

However, Treasury Secretary Steven Mnuchin issued a statement putting a positive spin on the administration’s economic agenda, saying that tax cuts, regulatory changes and altered trade policies “will generate the long-term growth needed to help secure these programs and lead them to a more stable path.”

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, called on Congress to embrace Medicare proposals in President Trump’s budget, saying that they “would strengthen the integrity of the Medicare program.” Along with strategies to try to slow spending on prescription drugs, one proposal would shift responsibility for uncompensated care payments from the Medicare program to the Treasury.

The annual reckoning of the stability of the nation’s two largest entitlement programs amplifies earlier warnings that both are unsustainable over time. It also urges Congress to revise the programs to ward off the shortfalls soon to “minimize adverse impacts” on the tens of millions of elderly and other vulnerable people who rely on the government help.

The new report’s forecast for Social Security is comparatively undramatic. It says that the trust funds that pay benefits to retirees, workers’ survivors and people with disabilities can, taken together, be expected to remain solvent until 2034, unchanged from a year ago.

Both programs have long been under pressure because of demographics. The aging of the large baby-boom generation is making up an increasing share of the nation’s population, with proportionally fewer working-age Americans chipping in payroll taxes.

Despite officials’ contention that Trump’s policies would heal the programs’ finances, the trustees’ report says: “Lawmakers should address these financial challenges as soon as possible.” The trustees typically also include two members of the public, but the administration has not filled those positions.

From administration to administration, the trustees’ report has for many years been a cautionary note about the financial fragility of the two main programs designed to buffer Americans from poverty in their older years. For more than two decades, presidents of both political parties and Congress have sporadically assembled high-level commissions to explore ways to prolong the solvency of one or both programs. None has led to major changes.

The Trump administration has not placed much focus on the programs’ future. The main change since Trump was elected in 2016 has been Congress’s action in February to repeal an unpopular aspect of the Affordable Care Act that was intended to have constrained Medicare spending if it rose too high.

The Independent Payment Advisory Board, known as IPAB, was to have been a committee of outside experts with power to slow Medicare’s spending if it reached a certain threshold.The board’s members were never appointed, and spending levels, as measured by the annual trustees’ reports, never reached the critical level.

From before the ACA was passed in 2010, Republican critics erroneously tarred IPAB, which Democrats held out as one of the few teeth in the law to slow health-care expenditures, as a “death panel” that would deny care to the elderly.

In the early years after the ACA was enacted, Obama-era trustees’ reports said the law was helping to hold down health-care spending. The report issued Tuesday says that the law had “introduced large policy changes and additional projection uncertainty.”

In keeping with efforts by Health and Human Services Secretary Alex Azar — one of the trustees — to usher in new payment methods that reward qualify and cost efficiency, the report says that “if the health sector cannot transition to more efficient models of care delivery and achieve productivity increases, the availability and quality” of care available to older Americans on Medicare will fall.

Sen. Ron Wyden (Ore.), the top Democrat on the Senate Finance Committee, said in a statement, “This report should eliminate any doubt that Trump’s tax law yanked Medicare closer to insolvency.”

House Ways and Means Committee Chairman Kevin Brady (R-Tex.) said in a statement that ensuring the solvency of the two programs “is of the utmost importance. . . . The time is now to come together in a bipartisan manner to address these real challenges.”

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