Medicare's financial picture brightens slightly

Medicare's hospital insurance trust fund is expected to run out in 2036, five years later than the fund's trustees projected last year. 

The Trustees of Social Security and Medicare published their annual report on the financial health of the two programs May 6. 

The improved financial state of the hospital insurance fund is due to several factors, including a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates, according to the trustees. The fund also brought in higher payroll tax income compared to the previous year, and lower-than-expected spending on inpatient and home health services. 

Once the hospital fund is depleted, it will be able to pay for only 89% of total scheduled Medicare benefits. 

Income in the hospital insurance fund is expected to exceed expenses by $12.2 billion in 2023. The trustees expect the fund to continue in a surplus until 2029, then a deficit until it is depleted in 2036. 

The fund had $208.8 billion in assets at the beginning of 2024, around 50 percent of expenditures predicted for the year. The fund is below the trustees' minimum recommended level of 100%. The fund has not met the trustee's minimum recommended level since 2003.  

Though the fund's go-broke date was pushed back again, the trustees warned Congress must take action. By 2098, Medicare costs are expected to reach 6.2% of the country's GDP, up from 3.8% in 2023. The increase would increase strain on taxpayers, the economy, Medicare beneficiaries and the federal budget, the trustees wrote. 

"Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare," the trustees wrote in a fact sheet.

Read the full report here. 

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