Medicare Will Be Insolvent by 2026—Can America Fix It in Time?

    Robert E. Moffit

    Health, Americas

    Sheets of former U.S. President Abraham Lincoln on the five-dollar bill currency are seen at the Bureau of Engraving and Printing in Washington March 26, 2015. The 150th anniversary of Lincoln's assassination at Ford's Theatre in Washington is April 15, 2015. REUTERS/Gary Cameron

    Problem: Medicare spending will grow faster than workers’ wages, the rate of inflation, the general economy and all other health-care spending.

    When will America’s Medicare Hospital Insurance (HI) trust fund run out of money to pay all of the promised Medicare benefits? According to the latest report by the Medicare Trustees, without any changes, the fund will be insolvent in 2026—three years earlier than they projected last year.

    With just two exceptions, the Medicare hospital program has run annual cash deficits since 2008. It is now projected to continue running these deficits until 2026. The Medicare Trustees coupled this new estimate with the same warning they have issued year after year: that the HI trust fund meets neither the short-term nor the long-term standards of “financial adequacy.”

    Short-Term Problems

    The report’s warning of pending insolvency has grabbed headlines, but it’s really old news. The United States Congressional Budget Office projected HI insolvency for 2026 back in January 2016. Frankly, for much of the history of the program, the Trustees have routinely warned Congress about the threat of trust fund depletion.

    So here is a safe prediction: The HI program will not go “bankrupt.” It has never gone into insolvency over the past half-century and is not likely to do so in the next half-century. Instead, Congress will likely wait until the time gets uncomfortably short, then scramble to do what has always done—shave payments to Part A providers or raise Americans’ payroll taxes. In fact, Congress has raised the Medicare payroll tax (now 2.9 percent of wages) ten times since the inception of the program in 1966.

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