July 15—The solvency of Medicare’s hospital trust fund was extended four years to 2030 Tuesday by the chief scorekeeper for Congress.

The Congressional Budget Office (CBO) reported that the hospital insurance trust fund would be “exhausted sometime around 2030,” which would require either an increase in Medicare taxes to maintain existing obligations or a cut in benefits. That timeframe was four years longer than the Medicare trustees, comprised of senior administration officials, projected in their 2013 report.

The solvency extension—despite surging enrollments by growing numbers of baby boomers—was credited in part to a slowdown in projected use of Medicare services, a scheduled 24 percent physician cut in April 2015, and the phasing in of payment cuts under the Affordable Care Act (ACA). Medicare spending was projected to continue a recent spending slowdown for several more years before gradually accelerating again.

Conversely, Medicaid and ACA marketplace spending are expected to accelerate in the coming years as both programs continue to rapidly grow enrollments through 2024. For instance, average ACA marketplace enrollment for 2014 of 6 million is expected to jump to 13 million in 2015.

No Cost Curve Bending

Additionally, the CBO appeared skeptical of claims and research indicating that healthcare payment and delivery reforms that have contributed to a historic slowdown in healthcare costs in recent years would continue the slowdown over the long term.

“During the past few years, some of the slowing (apart from that for Medicare) probably reflects the economic downturn and may be reversed once the economy recovers further,” the CBO wrote. “Even the portion of the recent slowdown that reflects structural changes in how care is delivered or how it is financed may largely represent another onetime downward shift in costs rather than a permanent reduction in the growth rate.”

Overall, federal healthcare spending is projected to increase from an estimated 4.8 percent of GDP in 2014 to 8.0 percent in 2039. The CBO also concluded that national spending on health care will increase from 16.2 percent of GDP in 2012 to about 22 percent of GDP by 2039.

No IPAB Cuts

Among good news for hospitals and other providers is that CBO projects Medicare spending increases will remain low enough over the coming decade to avoid triggering cuts by the Independent Payment Advisory Board (IPAB). IPAB, which was authorized by the ACA—or the secretary of the U.S. Department of Health and Human Services in its absence—is required to reduce Medicare spending if the rate of growth in spending per enrollee exceeds specified targets.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare.

Publication Date: Tuesday, July 15, 2014