The Hospital Insurance (HI) Trust Fund, or Medicare Part A, is projected to be exhausted in 2017—two years earlier than expected—as a result of declining payroll tax income from workers who have lost their jobs during the economic recession, according to the 2009 annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Calling the situation urgent, a summary of the report states, “Correcting the financial imbalance for the HI Trust Fund—even in the short range alone—will require substantial changes to program income and/or expenditures.” According to the report, the HI Trust Fund could be brought into actuarial balance over the next 75 years by an immediate 134 percent increase in the payroll tax (from a rate of 2.9 percent to 6.78 percent), or an immediate 53 percent reduction in program outlays, or a combination of both.
While rapid spending for Medicare Part B and Part D remains a concern, both programs remain adequately financed, said the report. It did, however, warn that adhering to “this status will be challenging as a result of reductions in premiums and general revenues under the ‘hold harmless’ provision of current law. Moreover, if Congress acts to prevent a scheduled 21.5-percent reduction in physician payment rates in 2010 and further reductions in 2011-2015, then actual Part B costs could exceed the current law projections shown in this report by 18 to 21 percent in the short range and by up to 10 percent in the long range.” One-fourth of Part B beneficiaries will also be paying large premium increases in the next two years.
Total Medicare expenditures are projected to increase from 3.2 percent of GDP in 2008 to 11.4 percent by 2083 and are projected to surpass Social Security expenditures in 2028.
