by Mitch Kokai
Senior Political Analyst, John Locke Foundation
James Capretta recently shared with Congress his concerns about Medicare’s long-term funding picture.
This subcommittee is to be commended for holding this hearing because the subject matter it will address — the financial outlook for Medicare generally, and status of the program’s Hospital Insurance (HI) trust fund specifically — will require Congress’ attention in the near term. Last year, the Board of Trustees charged with overseeing, and reporting on, the program’s financial status projected that HI would be depleted of reserves in 2026.1 It is not known at this time if this year’s report to Congress (due by April 1 according to the Medicare title of the Social Security Act) will alter the projected year of HI depletion.
The decline of HI’s reserves is of course, on its own, a problem that should concern Congress because of the importance of ensuring continuity in the provision of medical services. If HI were to have insufficient funds to pay fully for all of the claims it receives, it is likely that providers would get paid a fraction of what current regulations would allow, which might then jeopardize access to care for some beneficiaries. Congress has never allowed such a scenario to occur, and it is unlikely to do so in this instance either. There is every reason to expect corrective legislation will be passed in time to prevent an interruption of benefit payments.
However, even if near-term depletion of HI is averted, that will not resolve the fundamental problem because HI’s issues really are symptoms of a larger fiscal challenge.
The imbalance between HI spending and outgo is a manifestation of the widening gap between Medicare’s total costs, for both HI and Supplementary Medical Insurance (SMI), and the receipts (taxes and premiums) collected to pay for both trust funds’ expenses. …
… The core problem is the rapid growth of total Medicare spending, driven by an aging population and escalating costs for services, not strictly (or even primarily) an imbalance in HI-only income and outgo.