Social Security and Medicare Funds Still Face Long-Term Shortfalls, Report Says

The update reflects growing evidence about the long-term effects of the Covid-19 pandemic. The Medicare actuary found that Medicare beneficiaries who have survived were substantially healthier than the baseline health of those who died from the disease, altering projections for the costs of their care in the coming years.

The report also documented the continuation of a long-term trend, in which Medicare’s health care spending is growing more slowly than it has over its long history. The causes of this trend are hotly debated among researchers, some of whom attribute them to economic trends in the years after the Great Recession, and others who credit changes in the practice of medicine. The report noted that more hip and knee replacements are occurring as outpatient procedures, a shift from longer, more-expensive hospital stays and one possible example of how medical practices have shifted.

Medicare’s hospital bills are paid from a trust fund with dedicated resources, but hospital care represents only a fraction of Medicare’s overall spending. The report also examined the future of spending for doctors’ services and prescription drugs. Spending on prescription drugs is expected to be substantially lower than in prior estimates, thanks to provisions of the Inflation Reduction Act, which allow Medicare to regulate the prices of certain medications.

But despite the forecast of the fund’s improved health, the trustees warn that Medicare is on an unsustainable path. The program is set to begin drawing down its reserves in 2025. When those reserves are exhausted, which is estimated to happen in 2031, Medicare is predicted to have enough revenue to pay hospitals only 89 percent of their fees under current law.

President Biden has proposed policy changes to help extend the life of the hospital trust fund. In his budget, he called for increasing taxes on high earners and on certain types of businesses to help pay Medicare’s bills. He also proposed increasing Medicare’s regulation of prescription drug prices and redirecting those savings toward financing the program’s hospital bills. Those changes would extend the life of the trust fund by 25 additional years, according to the White House.

Article source: https://www.nytimes.com/2023/03/31/business/social-security-trust-fund-medicare.html