2019 Social Security and Medicare Trustees’ Reports Issued; Reports Sound Alarm (Again) as Depletion of Trust Fund is Imminent
Each year, the board of trustees of the Social Security Trust Fund and Medicare Trust Fund release reports to Congress providing an estimated projected financial outlook for the programs. Last week both reports were released. The 79th annual Social Security Report can be found here, and the 54th annual Medicare report can be found here. Both are quite lengthy documents that contain a substantial amount of information covering 2018, and provide estimates and predictions of the solvency of each program. Some key highlights of each report are noted below.
The Social Security Report
The report notes that:
- Social Security provided benefit payments to 62.9 million people in 2018;
- Of that nearly 63 million, 47 million were retired workers and dependents of retired workers, 6 million were survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers;
- The total cost of the program in 2018 was $1,000 billion;
- Applications for disability continued to drop as noted in last year’s report.
In addition, the total annual cost of the program is projected to exceed total annual income in 2019. The trustees also project that Social Security benefits will be able to be paid out until 2035, a full year later than projected in last year’s report. This could be in part due to disability applications declining steadily since 2010, and that the total number of disabled-worker beneficiaries in current payment status has been falling since 2014, as indicated in the report.
For our purposes, it is important to remember that Social Security and Medicare are intertwined. Once an individual has received 24 disability payments, they also gain access to the Medicare Trust Fund.
The Medicare Report
The Medicare report addresses the two separate Medicare trust funds, the Hospital Insurance (HI) Trust Fund, and the Supplementary Medical Insurance Trust Fund. The HI pays for inpatient and hospital care (Medicare Part A). The SMI Trust Fund consists of Medicare Part B (which helps pay for physician, outpatient costs, home health, and other services) and Medicare Part D (which helps cover the prescription drug benefit).
Some key findings of the report note that:
- In 2018, Medicare covered 59.9 million people;
- Of those 59.9 million, 51.2 million were aged 65 and older, and 8.8 million were disabled;
- In 2018, 36% of Medicare beneficiaries are enrolled in a supplemental or Medicare Advantage Plan (which is an increase of 2% since the last report);
- The total Medicare expenditures were $740.6 billion.
Most importantly, as with the 2017 and 2018 reports, the trustees have documented that the HI trust fund will not be adequately financed over the next 10 years. The estimated depletion date for the HI trust fund is 2026, and projected medical bills will not be fully covered starting at that time. Of note, this is different than the SMI trust fund, which is expected to be adequately financed over the next 10 years and beyond because of the premium costs collected for Medicare Part B and Part D. The difference in solvency of the funds is that the HI trust fund is funded though the collection of payroll taxes, and lower salaries, and subsequently lower taxes adversely affect the trust fund. Of concern is the fact that the report notes that growth for these programs is expected to grow at a faster than projected rate. Based on the findings of this report, by law, the President must submit proposed legislation to address the funding shortage.
What Do the Findings of These Reports Mean?
The findings continue to indicate a dire need for change and reforms to address Medicare’s financial challenges. It is likely that we will see some legislative efforts and reforms to address the financial concerns as found within these reports. With the looming insolvency of these funds and the prediction of continued growth at a faster pace for Part B and Part D, we will likely continue to see heightened recovery efforts against primary payers by Medicare, amidst the already existing ramp up we have seen over the last several months, as discussed here on our blog. This report is also a good reminder to consider the Medicare Advantage Plan (MAP) issue when attempting to attain Medicare Secondary Payer compliance. With MAP enrollment increasing each year, it is vital that payers address the conditional payment issues that arise with enrollment in these plans.
We will be sure to update our readers on any legislative efforts that may impact these programs.