The Board of Trustees of the Federal Hospital Insurance (“HI”) and Federal Supplementary Medical Insurance (“SMI”) Trust Funds has issued their 2009 annual report and the main news is that it appears that the Trust Fund will become illiquid in 2017, two years earlier than reported in last year’s report, and that the Social Security trust fund is expected to be exhausted in 2037, four years earlier than last year’s estimate.

The Trustees Report was released on May 12th and the comprehensive 242 page report discusses various aspects of the Trust Funds, including in addition to their overview and highlights sections, the economic and demographic assumptions, financial outlook and status of the HI and SMI funds, with lengthy actuarial analysis and estimates.  Their report shows Medicare’s financial problems are larger and more imminent than Social Security’s, with the program hard hit as demand for public health benefits and services increases along with the continuing rise of health care expenditures.

Some of the key highlights contained in the 2009 report are summarized as follows:

• Total Medicare expenditures for 2008 were $468.1 billion or 3.2% of the GDP ($461.6 billion for benefits and $6.5 billion for administrative expenses).
• In 2008, 45.2 million Medicare beneficiaries were covered by the Medicare program (37.8 million aged 65 and older, 7.4 million disabled).
• HI expenditure growth is estimated to climb and is projected to surpass Social Security expenditures in 2028.
• Based on current estimates, the Medicare fund is expected to run out of money in 2017, as HI tax income and other dedicated revenues are expected to fall short of HI expenditures in all future years based on current assumptions and projections.
• The Part D (the Medicare prescription drug benefit) average annual increase in expenditures is estimated to be 11.1% through 2018.

The Trustees conclude that the financial outlook for the Medicare program continues to raise serious concerns, and they clearly state that prompt action is needed to address these challenges – both the exhaustion of the HI Trust Fund and the anticipated rapid growth in HI, SMI, as well Part B and Part D of the Medicare program.  They also mention the physician pay cut overrides afforded by CMS, with the impact of almost doubling the Part B growth rate compared to the 5.5% used in their projections. 

The Wall Street Journal (5/13/09) reports that the Trustees Report factors in a 21% cut in physician payments for the upcoming year, but that Congress has cancelled such cuts over the past several years.  Such messages will be heard loud and clear by the President’s Administration and given the estimated rise to a $1.84 trillion federal deficit with the financial rescue and economic stimulus packages, industry analysts predict significant future changes in the way health care is funded, provided, and paid for.  Some Congressional leaders hope to pass healthcare reform legislation by July 31, just prior to the August recess.  Will be an interesting next could of months at Capitol Hill….so stay tuned.

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