Medicare Runs Out Of Money In 2026

The Medicare program's hospital insurance trust fund is still on track to run out by 2026, according to the Medicare Board of Trustees' latest report to Congress.

The prognosis for Medicare insolvency remains the same as the last few years despite the effects of the Covid-19 pandemic. The 2018, 2019 and 2020 reports all estimated that the trust fund would be depleted in the next five years.

Though 2026 is not very far away, the new report's projection actually provides some breathing room. A Congressional Budget Office report released last September predicted that the hospital insurance trust fund would become insolvent by 2024 as a result of the pandemic.

Per the most recent report, Medicare covered 62.6 million people in 2020, of which 8.5 million were disabled. Total expenditures last year reached $925.8 billion and total income was $899.9 billion.

Expenditures from the hospital insurance trust fund, which helps pay for inpatient hospital services, hospice care and skilled nursing facility and home health services following hospital stays, exceeded income by $60.4 billion due to a large amount of accelerated and advance payments. These payments will be repaid in 2021 and 2022, which will result in a small deficit in 2021 and a surplus in 2022.

But after that, the trustees project deficits in all future years until the trust fund becomes depleted in 2026.

Growth in hospital insurance trust fund expenditures has averaged 7.6% annually over the last five years, compared with non-interest income growth of 5.2%. Over the next five years, the projected average annual growth rate for expenditures is 3.1% and for non-interest income is 4.6%.

On the other hand, the supplementary medical insurance trust fund is expected to be adequately financed over the next 10 years and beyond, according to the report. This fund supports Medicare Part B, which helps pay for physician, outpatient hospital and home health services, and Medicare Part D, which provides subsidized access to drug insurance coverage.

The fund will be adequately financed because income from premiums and general revenue for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies.

The report indicates the urgent need for legislative changes to address Medicare's financial challenges, according to the trustees.

The health sector needs to transition to more efficient models of care delivery, among other changes, for Medicare beneficiaries to receive the same level of care quality and access as those with private health insurance, they wrote.

Further, this year's report triggers a Medicare funding warning, which requires the president to submit proposed legislation to Congress to respond to the warning and requires Congress to consider the legislation on an expedited basis.

Photo: Jaiz Anuar, Getty Images