Every year, Trustees of the Medicare Trust Fund project when the Trust Fund will not have the money needed to pay full Medicare Part A inpatient benefits. Notwithstanding the coronavirus pandemic, their 2021 projection remains the same as last year, 2026. And, Congress could and should act to shore up the Trust Fund.
A brief Medicare primer. About 63 million older adults and people with disabilities receive health insurance coverage through Medicare. Medicare has two primary funding sources, payroll contributions and general taxes. Payroll contributions cover the cost of Medicare Part A inpatient services. Fewer people used these services in 2020 because of COVID-19. So, even though fewer people were working and making payroll contributions, Part A remains as strong as last year.
It’s worth noting that the Medicare Part A Trust Fund has never had its reserves depleted. And, over the last 55 years, the Part A Trust Fund reserves have fluctuated wildly. Back in 2010, Congress gave it a large injection of capital, when it passed the Affordable Care Act and imposed an additional Medicare tax on the wealthiest Americans.
It’s also important to recognize that if the Part A reserves were to run out, Medicare Part A would still be able to cover 91 percent of projected benefits in 2026. And, if employment rises, payroll contributions will increase. Therefore, it’s more likely that the trust fund will build more reserves.
Last year, the Part A Trust Fund lost between $60 billion and $134 billion because of loans extended to providers and suppliers to help with COVID-19 payment disruptions. The Trust Fund should get this money back this year and next.
One critical way to strengthen the Trust Fund is for Congress to stop overpaying Medicare Advantage plans. By one expert account, if Congress does nothing, these plans will be overpaid as much as $355 billion in the next ten years. These overpayments are also driving up Medicare Part B premiums. Congress must trim the fat in Medicare Advantage.
In addition to the Part A Trust Fund, Medicare has a Supplemental Medical Insurance Trust Fund that covers 75 percent of outpatient care under Medicare Part B. The Medicare Part B premium covers the remaining 25 percent. And there is a Trust Fund that covers prescription drugs under Medicare Part D.
The Medicare Part B and D Trust Funds have the money they need to cover outpatient and drug benefits. General revenues cover these expenses, so money never runs out.
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