Key Medicare Fund Will Be Insolvent in Just Five Years
That’s how long until Medicare officially can’t pay all of its bills, according to the latest report on the program’s fiscal health. After that, without changes, the program will start to miss payments. Medicare is on track for a serious fiscal meltdown.
First, the gory details: Starting in 2026, the program’s Hospital Insurance (HI) Trust Fund, which covers a variety of inpatient hospital services, will be depleted, leaving the fund to operate on a cash-flow basis—and there won’t be enough cash coming into the program to pay all of the bills. Instead, the program will be able to pay about 91 percent of its tab, Medicare’s Trustees estimate. Without changes to the program’s financing structure, that percentage will shrink, leaving Medicare able to cover a smaller and smaller share of the costs associated with the HI fund.
Medicare already pays less than private insurance in many cases, and it’s a major payer for most hospitals. A nearly 10 percent reduction in payments would prove financially devastating to some hospitals, especially those that serve poorer populations, many of which are already struggling to stay afloat.
No doubt, this will result in some policymakers suggesting that Medicare should be restructured so that it can draw from general revenues, like the program’s Supplemental Medicare Insurance (SMI) fund, which pays for outpatient care, physician services, and prescription drug benefits. As the Trustees report notes, the SMI fund is “adequately financed into the indefinite future because current law provides financing
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