Medicare will run out of money two years sooner than projected just a year ago, according to a trustees report Wednesday that signals long-term challenges in meeting America’s promises to current and future retirees.
The Medicare Hospital Insurance Trust Fund will now be exhausted in 2028, up from 2030.
The administration offered a relatively rosy view of the update, noting the insurance program for seniors is expected to last 11 years longer than projected in the final report issued before the 2010 passage of Obamacare.
Yet it acknowledged the program’s challenges in outlying years, saying a decrease in payroll taxes and slower-than-expected decline in the use of inpatient care moved up the program’s exhaustion date.
“Medicare faces a substantial long-term shortfall that needs to be addressed,” Treasury Secretary Jack Lew said.
The situation surrounding the nation’s biggest entitlement, Social Security, also remains dire, with retirement and disability trust fund reserves projected to run dry in 2034 — the same year projected in last year’s report.
Once the fund is depleted, annual revenues from payroll taxes and taxation on Social Security benefits will be enough to fund about three-quarters of scheduled benefits.
“These reports reaffirm what we already know: The programs millions of Americans rely on for health care and retirement security are barreling down the path toward insolvency,” Rep. Kevin Brady, Texas Republican and chairman of the tax-writing Ways and Means Committee, said.
Democrats drew both pros and cons from the report.
Sen. Ron Wyden, Oregon Democrat and ranking member on the Senate Committee on Finance, said Medicare spending per enrollee is growing slower than the economy and health care spending overall, and Social Security is stable compared to last year.
But the report “also reveals there is important work ahead to ensure the guarantee is strengthened for the next generation of Americans,” he said. “Escalating drug prices are having an unprecedented impact on Medicare’s balance sheet. And Social Security’s finances have been improved thanks to action last year, but further action is needed to fully secure the benefits of workers and their families.”
Labor Secretary Thomas E. Perez used the report to push for more generous paid leave and child care policies, saying the U.S. could have kept 5 million more women in the workforce if it only kept pace with Canada’s approach.
Doing so would inject $20 billion into Social Security and $5 billion into Medicare in this year alone, he said.
Medicare’s fund for inpatient care would only be able to pay 87 percent of its costs should it run out of money in 2028.
House Republicans say significant reforms are needed to protect the program, which covered 53.8 million beneficiaries and cost $613 billion in 2014.
Their election-year health plan, released Wednesday, would gradually increase the Medicare retirement age, starting in 2020, alongside Social Security, so that it eventually hits 67.
Starting in 2024, seniors could enroll in traditional Medicare or choose from competing private plans, while receiving premium support from the federal government, according to the plan.