Close Close

Retirement Planning > Social Security > Social Security Funding

Trustees: Medicare Hospital Fund Could Run Dry In 2019

Your article was successfully shared with the contacts you provided.

The main Social Security trust fund, the Old-Age and Survivors Insurance fund, might not run out of cash until 2041, but the main Medicare fund, the Hospital Insurance fund, could empty out by early 2019.

The trustees of the Social Security and Medicare programs make those predictions in the 2008 Social Security and Medicare trust fund reports.

Social Security has about $4.3 trillion less funding in place than it appears to need over the next 75 years, the trustees for that program estimate.

The government could remedy the gap by immediately increasing the Social Security payroll tax rate to 15.6%, from 12.4% today, or by immediately reducing benefits by about 20%, the trustees estimate.

The Medicare Hospital Insurance trust fund, which backs the Medicare Part A hospitalization program, already is facing serious financial problems, according to the trustees who oversee Medicare.

The hospital trust fund probably will spend more cash than it takes in this year, the trustees warn.

Moreover, under the intermediate economic assumptions and other intermediate assumptions, “the HI trust fund is not adequately financed over the next 10 years,” the trustees write. “From the beginning of 2008 to the end of 2017, the assets of the HI trust fund are projected to decrease from $326 billion to $96 billion, which would be far less than the recommended minimum level of 1 year’s expenditures.”

The trustees are predicting the hospital insurance fund will be exhausted a few months into 2019.

The federal Supplementary Medical Insurance trust fund, which backs the Medicare Part B physician care and Medicare Part D prescription drug benefits programs, would fare better, because the government re-sets Medicare Part B rates and general revenue support each year, but Medicare Part B and Part D costs are increasing rapidly and soon could consume a much higher percentage of the gross domestic product than they do today, the trustees write.

Congress could repair the imbalance at the hospital insurance fund by immediately increasing the 2.9% payroll tax that funds the program to 6.44%, or by immediately cutting program expenditures about 51%, the trustees write.

“More realistically, the tax and/or benefit changes could be made gradually, rather than immediately, but would ultimately have to reach much more substantial levels to eliminate the deficit,” the trustees write.

If Congress phases in tax increases or benefits cuts, taxes could end up being 3 times as high as they are today, or the inflation-adjusted expenditures could be about 66% less than they are today, the trustees write.

The Medicare trust funds continue to be in worse shape than the Social Security funds because they must cope with increases in health care costs as well as the aging of the U.S. population, officials say.

“If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the ability of these programs to support people who depend on them,” Treasury Secretary Henry Paulson says in a statement about the trustees’ reports. “Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America’s future prosperity.”


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.