The Medicare trust fund will be insolvent by 2028, according to the 2016 Medicare trustees' report released Wednesday.
The prediction is a departure from the 2030 date the Obama administration outlined in the previous two reports. The estimate is still later than the timeline released by the Congressional Budget Office in January, which estimated the program would be solvent only until 2026.
The updated estimate is the result of a projected decrease in payroll taxes and a slower-than-expected decrease in inpatient utilization, Andy Slavitt, acting CMS administrator, said at a news briefing Wednesday.
Like last year, the report does not include alternative payment models now being tested by the Center for Medicare and Medicaid Innovation. The only alternative pay model included in the insolvency estimate is the Medicare Shared Savings Program for ACOs, which was also included in last year's report.
However the administration is highlighting that 2028 is 11 years longer than projected estimates before the Affordable Care Act become law.
“Per-Medicare beneficiary cost growth continues to be exceptionally low,” Slavitt said. Per-enrollee Medicare spending growth has been averaging 1.4% over the past five years, which is lower than GDP growth.
Medicare Part D expenditures per enrollee are estimated to increase by an average of 5.8% annually through 2025, which is higher than the combined per-enrollee growth rate for Medicare Part A and B, estimated at 4%. The report found that these costs are trending higher than previously predicted, particularly for specialty drugs.
State Medicaid agencies may again find themselves on the hook for millions in new obligations thanks to a significant increase in Medicare premiums.
The Medicare trustees report projected Part B premiums would increase by 23%—up to $149 a month from $121.80.
However, most Medicare beneficiaries will be spared, since roughly 70% pay their Part B premiums through deductions from their Social Security benefit payments. A policy called “hold harmless” shields beneficiaries from any premium hikes that outpace cost-of-living increases.
This policy ensures that Social Security check amounts will not decline from one year to the next because of increases in Medicare Part B premiums.
Not protected from the premium increase are those who do not pay their Part B premiums through deductions from their Social Security benefit payments. This group includes those who are newly enrolled in Medicare and individuals dually eligible for Medicaid.
“Based on early data showing the potential for a small Social Security cost-of-living adjustment, the Trustees Report projects that Medicare's 'hold harmless' protection will be triggered again this year,” according to a CMS statement.