Medicare: Insolvency Projections
September 19, 2014
(RS20946)
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Summary
Medicare is the nation's health insurance program for persons aged 65 and older and certain Medicare: Insolvency Projections
Patricia A. Davis
Specialist in Health Care Financing
July 3, 2013
Congressional Research Service
7-5700
www.crs.gov
RS20946
CRS Report for Congress
Prepared for Members and Committees of Congress
Medicare: Insolvency Projections
Summary
Medicare is the nation’s health insurance program for persons age 65 and older and certain
disabled persons. Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI);
Part Part B (Supplementary Medical Insurance, or SMI); Part C (Medicare Advantage, or MA); and
Part D (the outpatient prescription drug benefit).
The Part A program is financed primarily
through payroll taxes levied on current workers and their employers; these are credited to the HI
trust fund Trust Fund. The Part B program is financed through a combination of monthly premiums paid by
current enrollees and general revenues. Income from these sources is credited to the SMI
trust
fundTrust Fund. As an alternative, beneficiaries can choose to receive all their Medicare services through
private health plans under the MA program; payment is made on their behalf in appropriate parts
from the HI and SMI
trust fundsTrust Funds. The Part D drug benefit is funded through a separate account in
the SMI
trust fundTrust Fund and is financed through general revenues, state contributions, and beneficiary
premiums. The HI and SMI
trust fundsTrust Funds are overseen by a board of trustees that makes an annual
report to Congress concerning the financial status of the funds.
Almost from its inception, the HI
trust fundTrust Fund has faced a projected shortfall. The insolvency date
has been postponed a number of times, primarily due to legislative changes that have had the
effect of restraining growth in program spending. The
20132014 Medicare Trustees report projects
that, under intermediate assumptions, the HI
trust fundTrust Fund will become insolvent in
2026, two2030, four years
later than estimated in the prior year
’s report.
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Medicare: Insolvency Projections
Contents
Introduction...................................................................................................................................... 1
Medicare Hospital Insurance (HI) Financing .................................................................................. 2
What Is the HI Trust Fund?.............................................................................................................. 2
History of HI Solvency Projections ................................................................................................. 3
Current Insolvency Projections ........................................................................................................ 6
What Would Happen If the Fund Became Insolvent?...................................................................... 7
Financing Issues............................................................................................................................... 8
Figures
Figure 1. Projected Number of Years Until HI Insolvency .............................................................. 4
Figure 2. HI Trust Fund Assets at Beginning of Year
as a Percentage of Annual Expenditures ....................................................................................... 7
Tables
Table 1. Year of Projected Insolvency of the Hospital Insurance Trust Fund in Past and
Current Trustees Reports .............................................................................................................. 4
Table A-1. Operation of the Hospital Insurance Trust Fund, Calendar Years 1970-2022................ 9
Table B-1. Tax Rates and Maximum Tax Bases ............................................................................ 11
Appendixes
Appendix A. Operation of the Hospital Insurance Trust Fund ........................................................ 9
Appendix B. Historical Payroll Tax Rates ..................................................................................... 11
Contacts
Author Contact Information........................................................................................................... 12
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Medicare: Insolvency Projections
Introduction
's report.
Medicare: Insolvency Projections
Introduction
Medicare is a federal insurance program that pays for covered health care services of qualified
beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal
entitlement program to provide health insurance to individuals
aged 65 and older, and
it has been
expanded over the years to include permanently disabled individuals under
65.
the age of 65.
Medicare consists of four distinct parts, A through D. Part A covers hospital services, skilled
nursing facility (SNF) services, home health visits, and hospice services. Most persons aged 65
and older are automatically entitled to premium-free Part A because they or their spouse paid
Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social
Security or the Railroad Retirement systems. Part B covers a broad range of medical services,
including physician services, laboratory services, durable medical equipment, and outpatient
hospital services. Enrollment in Part B is voluntary; however, most beneficiaries with Part A also
enroll in Part B. Part C
, Medicare Advantage (MA), provides private plan options, such as managed care, for beneficiaries who
are enrolled in both Parts A and B.
Part D provides optional outpatient prescription drug
coverage.
1
1
Medicare expenditures are driven by a variety of factors, including the level of enrollment, the
complexity of medical services provided, health care inflation, and life expectancy. In
2012,
2013, Medicare provided benefits to about
5152 million persons at an estimated total cost of $
574583 billion.
The Medicare program has two separate trust funds—the Hospital Insurance (HI)
trust fund and
Trust Fund and Supplementary Medical Insurance (SMI)
trust fundTrust Fund. The Part A program, which is financed
mainly through payroll taxes levied on current workers, is accounted for through the HI
trust
fund. The PartTrust Fund. The Parts B and D programs, which are primarily funded through general revenue and
beneficiary premiums, are accounted for through the SMI
trust fund.2Trust Fund.2 Both funds are maintained
by the Department of the Treasury and
are overseen by a board of trustees that reports annually to
Congress concerning the funds
’' financial status.
33 Financial projections are made using economic
assumptions based on current law, including estimates of consumer price index (CPI), workforce
size, wage increases, and life expectancy.
Almost from its inception, the HI
trust fundTrust Fund has faced a projected shortfall and eventual
insolvency. Because of the way it is financed, the SMI
trust fundTrust Fund cannot become insolvent;
however, the Medicare Trustees continue to express concerns about the rapid growth in SMI
costs.4
1
For additional information on the Medicare program, see CRS Report R40425, Medicare Primer, coordinated by
Patricia A. Davis and Scott R. Talaga.
2
Payments are made for beneficiaries enrolled in Part C in appropriate portions from the HI and SMI trust funds.
3
Medicare Trustee reports may be found at http://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/ReportsTrustFunds/index.html.
4
For further information on Medicare financing, see CRS Report R43122, Medicare Financial Status: In Brief, by
Patricia A. Davis.
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Medicare: Insolvency Projections
Medicare Hospital Insurance (HI) Financing
costs.4
Medicare Hospital Insurance Financing
Similar to the Social Security system, the HI portion of Medicare was designed to be
selfsupportingself-supporting and is financed through dedicated sources of income rather than relying on general tax
revenues. The primary source of income credited to the HI
trust fundTrust Fund is payroll taxes paid by
employees and employers; each pays a tax of 1.45% on earnings. The self-employed pay 2.9%.
Unlike Social Security, there is no upper limit on earnings subject to the tax.
55 The Patient
Protection and Affordable Care Act (ACA
, ; P.L. 111-148
, as amended) imposes an additional tax of
0.9% on high-income workers with wages over $200,000 for single filers
, and $250,000 for joint
filers filers, effective for taxable years beginning in 2013.
6
6
Additional income to the HI
trust fundTrust Fund consists of premiums paid by voluntary enrollees who are
not entitled to premium-free Medicare Part A through their (or their spouse
’'s) work in covered
employment; a portion of the federal income taxes paid on Social Security benefits;
77 and interest
on federal securities held by the trust fund.
What Is the HI Trust Fund?
The HI trust fund
The HI Trust Fund is a financial account in the U.S. Treasury into which all income to the Part A
portion of the
Medicare program is credited
, and from which all benefits and associated administrative costs
of the program are paid. The trust fund is solely an accounting mechanism—there is no actual
transfer of money into and out of the fund.
8
8
HI operates on a
“"pay-as-you-go
”" basis
;, meaning that the annual revenues to the HI
trust fundTrust Fund, primarily the
taxes paid by current workers and their employers, are used to pay Part A benefits for today
’s
's Medicare beneficiaries. When the government receives Medicare revenues (payroll taxes),
income is credited by the Treasury to the appropriate trust fund in the form of special issue
interest-bearing government securities.
99 (Interest on these securities is also credited to the trust
fund.) The tax income exchanged for these securities then goes into the general fund of the
Treasury and is indistinguishable from other cash in the general fund; this cash may be used for
any government spending purpose. When payments for Medicare Part A services are made, the
payments are paid out of the general treasury and a corresponding amount of securities is deleted
from (written off) the HI trust fund.
5
Prior to 1991, the upper limit on taxable earnings was the same as for Social Security. The Omnibus Budget
Reconciliation Act of 1990 (OBRA 90, P.L. 101-508) raised the limit in 1991 to $125,000. Under automatic indexing
provisions, the maximum was increased to $130,200 in 1992 and $135,000 in 1993. The Omnibus Budget
Reconciliation Act of 1993 (OBRA 93, P.L. 103-66) eliminated the upper limit entirely beginning in 1994.
6
See archived CRS Report R41128, Health-Related Revenue Provisions in the Patient Protection and Affordable Care
Act (ACA), by Janemarie Mulvey, for additional detail.
7
Since 1994, the HI fund has had an additional funding source—OBRA 93 increased the maximum amount of Social
Security benefits subject to income tax from 50% to 85% and provided that the additional revenues would be credited
to the HI trust fund.
8
There are about 200 federal trust funds. For additional information on how federal trust funds operate within the
context of the federal budget, see CRS Report R41328, Federal Trust Funds and the Budget.
9
Unlike marketable securities, special issues can be redeemed at any time at face value. Investment in special issues
gives the trust funds the same flexibility as holding cash.
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Medicare: Insolvency Projections
from (written off) the HI Trust Fund.
In years in which the trust fund spends less than the income it receives, it has a cash-flow surplus
;
. When this occurs, the trust fund securities exchanged for any income in excess of spending show up as
“assets” on
assets on the financial accounting balance sheets and are available to the system to meet future obligations.
The trust fund surpluses are not reserved for future Medicare benefits
, but are simply
bookkeeping entries that indicate how much Medicare has lent to the Treasury (or
, alternatively,
what is owed to Medicare by the Treasury). From a unified budget perspective, these
“assets”
assets represent future budget obligations and are treated as liabilities.
If, in a given year, the trust fund spends more than the income it receives, it has a cash-flow
deficit deficit. In deficit years, Medicare can redeem any securities accumulated in previous years
(including interest). When the securities are redeemed, the government needs to raise the
resources necessary to pay for the securities, and the monies are transferred from the Treasury
’s
's general fund to the HI
trust fundTrust Fund. When the assets credited to the trust fund reach zero, the fund is
deemed
insolvent.
insolvent.
(See Appendix A for a discussion of recent and projected HI cash flows
, and
for data on historical
and projected HI operations through
2022.)
2023.)
History of HI Solvency Projections
The HI trust fund
The HI Trust Fund has never become insolvent. The
Medicare Board of Trustees projected insolvency for the
HI fund beginning with the 1970 report, at which time the HI
trust fundTrust Fund was expected to become
insolvent in only two years. (See Table 1 and Figure 1.) The insolvency date has been postponed
a number of times since the beginning of Medicare through a variety of methods. For example,
the payroll tax rate has been adjusted periodically by Congress as one of the mechanisms to
maintain the financial adequacy of the trust fund. (See Appendix B for historical payroll tax
rates.)
Other legislative changes have been made at various times to slow the growth in HI program
spending; generally, these measures
werehave been part of larger budget reconciliation laws that
attempted
attempt to restrain overall federal spending. To illustrate, in the mid-1990s, efforts to curtail Medicare
spending intensified as Congress considered legislation to bring the entire federal budget into
balance and culminated in the passage of the Balanced Budget Act of 1997 (BBA 97
, ; P.L.
10533105-33). In early 1997, the Medicare Trustees had projected that the HI
trust fundTrust Fund would become
insolvent within four years, in 2001. Following the enactment of BBA 97, significant
improvements were made in the short-term projections over the next few years. The new
projections reflected a number of factors, including lower expected expenditures as a result of
changes made by BBA 97 (primarily resulting from modifications in Medicare Part C payments
,10
10 and the establishment of prospective payment systems for certain Part A providers)
, continuing
; continued efforts to combat fraud and abuse
,; and strong economic growth, which was expected to generate
more revenues to the trust fund from payroll taxes.
10
BBA 97 established the “Medicare+Choice” program under Part C. Medicare Part C was changed to “Medicare
Advantage” by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173).
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Medicare: Insolvency Projections
Table 1.
Table 1. Year of Projected Insolvency of the Hospital Insurance
(HI) Trust Fund in Past
and Current Trustees Reports
Year of
Trustees
report
Year of
projected
insolvency
Year of
Trustees
report
Year of
projected
insolvency
Year of
Trustees
report
Year of
projected
insolvency
1970
1972
1985
1998
1999
2015
1971
1973
1986
1996
2000
2025
1972
1976
1986 amended
1998
2001
2029
1973
none indicated
1987
2002
2002
2030
1974
none indicated
1988
2005
2003
2026
1975
late 1990s
1989
none indicated
2004
2019
1976
early 1990s
1990
2003
2005
2020
1977
late 1980s
1991
2005
2006
2018
1978
1990
1992
2002
2007
2019
1979
1992
1993
1999
2008
2019
1980
1994
1994
2001
2009
2017
1981
1991
1995
2002
2010
2029
1982
1987
1996
2001
2011
2024
1983
1990
1997
2001
2012
2024
1984
1991
1998
2008
2013
2026
Source: Intermediate projections of various Medicare Trustees reports, 1970-2013.
Figure 1. Projected Number of Years Until HI Insolvency
30
28 28
25
25
23
19
20
17
15
12
15
14
10
7
4
2
13
13
10
10
5
13
16
7
5
14
15 15
12 12
10
10
6
7
13
11
12
13
8
7
5
4
2
0
Source: Intermediate projections of various Medicare Trustees reports, 1970-2013.
Note: No specific estimates were provided by the Trustees for years 1973-1977 and 1989.
A number of observers contended that the savings achieved through the enactment of BBA 97
were greater than intended at the time of enactment and had unintended consequences for health
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Medicare: Insolvency Projections
care providers. As a result of these concerns, Congress subsequently enacted two measures (the
Balanced Budget Refinement Act of 1999 [BBRA 99, P.L. 106-113] and the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 [BIPA 2000, P.L. 106-554]). These
measures were designed to reverse some of the BBA 97 spending reductions. Despite enactment
of both BBRA 99 and BIPA 2000, which increased program spending, the 2001 and 2002
Trustees reports continued to delay the projected insolvency date. These improvements in
solvency projections reflected both stronger-than-expected economic growth and lower-thanexpected program costs due to lower projected enrollment in Medicare Part C, heightened antifraud and abuse initiatives, and lower-than-expected increases in health care costs.
However, the 2003 report shifted direction again. Its projected insolvency date was 2026, four
years earlier than the 2030 date projected in the 2002 report. The revision was due to lower-thanexpected HI-taxable payroll and higher-than-expected hospital expenditures.
The 2004 report projected that, under intermediate assumptions, the HI trust fund would become
insolvent in 2019, seven years earlier than projected in 2003. The revision of the projected
insolvency date was due to a number of factors, including slow wage growth (on which payroll
taxes are based) and faster growth in inpatient hospital benefits. In addition, the enactment of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173)
added significantly to HI costs, primarily through higher payments to rural hospitals and to
private plans under the MA program.11
The 2005 Trustees report projected that, under intermediate assumptions, the HI trust fund would
become insolvent in 2020, one year later than projected in 2004. The revision reflected slightly
higher income and slightly lower costs in 2004 than previously estimated. The 2006 report moved
the insolvency date forward again; under the Trustees’ intermediate assumptions, the HI trust fund
would become insolvent in 2018. The revision reflected expectations of slightly higher costs and
increased utilization of HI services.
Both the 2007 and 2008 reports projected a 2019 insolvency date, though the 2008 report
indicated it would occur earlier in the year. The 2009 report moved the insolvency date forward to
2017, due primarily to the economic recession.
The 2010 Medicare Trustees report,12 issued subsequent to the enactment of ACA, estimated that
the combination of lower Part A costs13 and higher payroll tax revenues expected as a result of the
ACA would postpone the depletion of HI trust fund assets until 2029, 12 years later than the date
projected in their 2009 report. Although the Medicare Trustees noted that the financial outlook for
the Medicare program appeared to have improved as a result of ACA, they cautioned that the
projections in the report were more uncertain than normal, due to the potential for some of the
expenditure reductions not to materialize. As such, the actuaries of the Centers for Medicare &
Medicaid Services (CMS) issued a supplemental memorandum that explained and quantified the
11
The Part D outpatient prescription drug program, which was created by MMA, is funded under SMI; the increased
expenditures associated with this new benefit therefore had little impact on projections of Medicare (HI) solvency.
12
2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, August 5, 2010, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/ReportsTrustFunds/downloads//tr2010.pdf.
13
The expected reductions were primarily due to productivity adjustments to Part A provider payment updates and
reduced payments to Medicare Advantage plans.
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Medicare: Insolvency Projections
potentially higher costs than those estimated in the 2010 Trustees report.14 This “illustrative
alternative” projected that the HI trust fund would become insolvent in 2028, one year earlier than
that projected in the 2010 Trustees report.
The 2011 Report of the Medicare Trustees15 projected that the HI trust fund would become
insolvent in 2024, five years earlier than projected in the 2010 report. The worsening financial
outlook was primarily due to lower than expected payroll taxes stemming from higher than
expected unemployment and slow growth in wages in 2010. The “illustrative alternative” also
projected that the HI trust fund would become insolvent in 2024, although earlier in the year.16
The 2012 Trustees Report17 projected that the HI trust fund would become insolvent in 2024, the
same year as estimated in the 2011 report. While the Trustees expected that income from payroll
taxes would increase at a faster rate than expenditures through 2018 due to the projected
economic recovery, the application of an additional 0.9% HI payroll tax for high-income workers
beginning in 2013, and the 2% reduction in spending required by the Budget Control Act of 2011
(BCA, P.L. 112-25) from 2013 through 2021,18 income was still expected to be insufficient to
cover projected HI expenses during that period. The “illustrative alternative” also projected that
the HI trust fund would become insolvent in 2024, although earlier in the year.19
Current Insolvency Projections
In their 2013 report, the Trustees project a somewhat better short-term outlook for the HI trust
fund, and have therefore moved the insolvency date two years later than their 2012 estimate, to
2026 (from 2024 in the prior report). The 2013 Trustees report projects that in the short term,
expenditures will continue to exceed income through 2014, and beginning in 2015 through 2020,
the fund will run a slight surplus. Beyond 2020, expenditure growth is expected to again outpace
growth in income. Trust fund assets will be used to make up the difference between income and
expenditures, until the assets are depleted in 2026. (See Figure 2.)
14
Memo from John D. Shatto and M. Kent Clemens, “Projected Medicare Expenditures Under an Illustrative Scenario
with Alternative Payment Updates to Medicare Providers,” August 5, 2010, http://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads//2010TRAlternativeScenario.pdf.
15
2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, May 13, 2011, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/ReportsTrustFunds/downloads//tr2011.pdf.
16
Memo from John D. Shatto and M. Kent Clemens, “Projected Medicare Expenditures Under an Illustrative Scenario
with Alternative Payment Updates to Medicare Providers,” May 13, 2011, http://www.cms.gov/Research-StatisticsData-and-Systems/Research/ActuarialStudies/downloads//2011TRAlternativeScenario.pdf.
17
2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
ReportsTrustFunds/downloads//tr2012.pdf.
18
For additional information on BCA and required spending reductions, see CRS Report R41965, The Budget Control
Act of 2011, by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan; and CRS Report R42050, Budget
“Sequestration” and Selected Program Exemptions and Special Rules, coordinated by Karen Spar.
19
Memo from John D. Shatto and M. Kent Clemens, CMS Office of the Actuary, “Projected Medicare Expenditures
Under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers,” May 18, 2012,
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/
Downloads/2012TRAlternativeScenario.pdf.
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Similar to years 2010 through 2012, the CMS actuaries issued an illustrative alternative scenario
that assumed that certain ACA changes that reduce Part A provider reimbursements would be
made through 2019, and then gradually phased out starting in 2020.20 Because the impact of these
changes is expected to be relatively minor in the short term, the estimated trust fund exhaustion
date provided in this scenario is the same as that under the current law scenario, 2026; however,
the trust fund is expected to be depleted somewhat earlier in the year under the alternative
scenario.
Figure 2. HI Trust Fund Assets at Beginning of Year
as a Percentage of Annual Expenditures
Estimates from 2009, 2010, 2011, 2012, and 2013 Trustees Reports
1.5
2009 Estimates
1.3
1.1
0.9
2010 Estimates
2011 Estimates
2012 Estimates
2013 Estimates
0.7
0.5
0.3
0.1
-0.1
Sources: Data from the 2009 Medicare Trustees Report, Table II.E1, and Summaries of the 2010, 2011, 2012,
and 2013 Annual Reports of the Social Security and Medicare Boards of Trustees, Chart D (2010 and 2011) and
Chart E (2012 and 2013).
What Would Happen If the Fund Became Insolvent?
The practical function of the HI trust fund is that it permits the continued payment of bills in the
event of a temporary financial strain (e.g., lower income or higher costs than expected) without
requiring legislative action. As long as the HI trust fund has a balance (i.e., there are securities
credited to the fund), the Treasury Department is authorized to make payments for Medicare
Part A services. If the trust fund is not able to pay all of current expenses out of current income
and accumulated trust fund assets, it is considered to be insolvent.21
20
Memo from John D. Shatto and M. Kent Clemens, “Projected Medicare Expenditures under Illustrative Scenarios
with Alternative Payment Updates to Medicare Providers,” May 31, 2013, http://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2013TRAlternativeScenario.pdf.
21
From time to time, it is reported that Medicare is on the verge of “bankruptcy,” however, in the context of federal
(continued...)
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To date, the HI trust fund has never become insolvent, and there are no provisions in the Social
Security Act that govern what would happen if that were to occur. For example, there is no
authority in law for the program to use general revenue to fund Part A services in the event of
such a shortfall.
In their 2013 report, the Medicare Trustees project that the HI trust fund will be exhausted in
2026. At that time, HI would continue to receive tax income from which some benefits could be
paid; however, funds would only be sufficient to pay for 87% of Part A expenses. Unless action is
taken prior to that date to increase revenues or decrease expenditures (or some combination of the
two), Congress may face a legislative decision regarding whether, and/or how, to provide for
another source of funding (e.g., general revenues) to make up for these deficits.
Financing Issues
Much of the concern about the financial status of Medicare tends to focus on the HI trust fund
date of insolvency when Medicare no longer has the authority to pay for Part A health care
services in full. This focus can, however, detract from the larger issues confronting the Medicare
program as a whole, and its current and future impact on the federal budget and on taxpayers.
When viewed from the perspective of the entire federal budget, as the number of beneficiaries
and per capita health care costs continue to grow, total Medicare spending obligations (HI and
SMI spending combined) are expected to place increasing demands on federal budgetary
resources. For example, changes to the physician sustainable growth rate (SGR) payment system
to prevent scheduled cuts in Medicare payments to doctors beginning in 2014 would require
significant additional federal funding. However, because payments to physicians are made
through the SMI trust fund, which is funded through premiums and general revenues, these
additional expenditures would have little to no effect on estimates of Medicare solvency (which
reflects only expected HI trust fund spending).
(...continued)
trust funds, this term is not meaningful. It is true that a trust fund’s outgo can be greater than its income and trust funds
can have a zero balance, but, unlike private businesses, the federal government is not in danger of “going out of
business” or having its assets seized by creditors. As noted, Congress has often taken actions to increase a trust fund’s
revenues or reduce its outgo when the Medicare HI trust fund has faced imminent insolvency.
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Appendix A. Operation of the Hospital Insurance
Trust Fund
Beginning in 2004, expenditures began exceeding tax income (from payroll taxes and from the
taxation of Social Security benefits). Expenditures began to exceed total income (tax income plus
all other sources of revenue) in 2008, and HI assets (the balance of the HI trust fund at the
beginning of the year) were used to meet the portion of expenditures that exceeded income.
Expenditures have exceeded income every year since then and are expected to continue doing so
through 2014. Although the trust fund is projected to run a small surplus in years 2015 through
2020, after that time expenditures are expected to again exceed income, with trust fund assets
making up the difference until the asset balance is depleted in 2026. At that time, the trust fund
will no longer have sufficient funds to allow for the full payment of Part A expenditures (see
Table A-1 below for historical and projected Medicare financial data through 2022).
Table A-1. Operation of the Hospital Insurance Trust Fund,
Calendar Years 1970-2022
($ in billions)
Expenditures
Income
Year
Payroll
Taxes
Interest,
Transfers,
Othera
Total
Benefit
Payments
Admin.
Expenses
Trust Fund
Total
Net
Change
Balance at
End of Year
Historical Data
1970
$4.9
$1.2
$6.0
$5.1
$0.2
$5.3
$0.7
$3.2
1975
11.5
1.4
13.0
11.3
0.3
11.6
1.4
10.5
1980
23.8
2.1
26.1
25.1
0.5
25.6
0.5
13.7
1985
47.6
3.9
51.4
47.6
0.8
48.4
4.8
20.5
1990
72.0
8.4
80.4
66.2
0.8
67.0
13.4
98.9
1995
98.4
16.7
115.0
116.4
1.2
117.6
-2.6
130.3
2000
144.4
22.9
167.2
128.5
2.6
131.1
36.1
177.5
2001
152.0
22.7
174.6
141.2
2.2
143.4
31.3
208.7
2002
152.7
25.8
178.6
149.9
2.6
152.5
26.1
234.8
2003
149.2
26.5
175.8
152.1
2.5
154.6
21.2
256.0
2004
156.5
27.5
183.9
167.6
3.0
170.6
13.3
269.3
2005
171.4
28
199.4
180.0
2.9
182.9
16.4
285.8
2006
181.3
30.2
211.5
189.0
2.9
191.9
19.6
305.4
2007
191.9
31.9
223.7
200.2
2.9
203.1
20.7
326.0
2008
198.7
32
230.8
232.3
3.3
235.6
-4.7
321.3
2009
190.9
34.5
225.4
239.3
3.2
242.5
-17.1
304.2
2010
182.0
33.6
215.6
244.5
3.5
247.9
-32.3
271.9
2011
195.6
33.4
228.9
252.9
3.8
256.7
-27.7
244.2
Congressional Research Service
9
Medicare: Insolvency Projections
Expenditures
Income
Payroll
Taxes
Year
2012
205.7
Interest,
Transfers,
Othera
Total
Benefit
Payments
Admin.
Expenses
Trust Fund
Total
Net
Change
Balance at
End of Year
37.3
243.0
262.9
3.9
266.8
-23.8
220.4
Intermediate Estimate
2013
216.5
31.8
248.2
266.6
3.9
270.5
-22.2
198.1
2014
230.4
34.6
265.1
271.1
4.2
275.2
-10.2
188.0
2015
248.4
38.0
286.4
279.0
4.6
283.6
2.8
190.8
2016
266.5
41.7
308.2
296.2
5.1
301.3
6.9
197.7
2017
284.9
45.5
330.4
314.8
5.7
320.5
9.9
207.6
2018
303.2
49.6
352.8
339.3
6.2
345.5
7.3
214.9
2019
319.7
54.7
374.3
361.2
6.7
367.9
6.4
221.3
2020
335.5
58.5
393.9
386.4
7.2
393.6
0.3
221.6
2021
352.0
63.2
415.1
414.0
7.7
421.8
-6.7
215.0
2022
368.4
66.2
434.6
449.2
8.5
457.7
-23.1
191.8
Source: 2013 Medicare Trustees Report, Table III.B4.
Notes: Sums may not equal totals due to rounding.
a.
Includes income from the taxation of Social Security benefits, Railroad Retirement account transfers,
premiums paid by voluntary enrollees, and interest.
Congressional Research Service
10
Medicare: Insolvency Projections
Appendix B. Historical Payroll Tax Rates
Table B-1. Tax Rates and Maximum Tax Bases
Tax rate (percentage of taxable earnings)
Maximum tax base
Employees and
employers, each
Self-employed
1966
$6,600
0.35%
0.35%
1967
6,600
0.50
0.50
1968-71
7,800
0.60
0.60
1972
9,000
0.60
0.60
1973
10,800
1.00
1.00
1974
13,200
0.90
0.90
1975
14,100
0.90
0.90
1976
15,300
0.90
0.90
1977
16,500
0.90
0.90
1978
17,700
1.00
1.00
1979
22,900
1.05
1.05
1980
25,900
1.05
1.05
1981
29,700
1.30
1.30
1982
32,400
1.30
1.30
1983
35,700
1.30
1.30
1984
37,800
1.30
2.60
1985
39,600
1.35
2.70
1986
42,000
1.45
2.90
1987
43,800
1.45
2.90
1988
45,000
1.45
2.90
1989
48,000
1.45
2.90
1990
51,300
1.45
2.90
1991
125,000
1.45
2.90
1992
130,200
1.45
2.90
1993
135,000
1.45
2.90
1994-2012
no limit
1.45
2.90
no limit
1.45
2.90
Calendar Year
Past experience
Scheduled in current law
2013 and later
Source: 2013 Report of the Medicare Trustees, Table III.B2.
Notes: Beginning in 2013, workers pay an additional 0.9% of their earnings above $200,000 (those who file
individual tax returns) or $250,000 (those who file joint tax returns).
Congressional Research Service
11
Medicare: Insolvency Projections
Author Contact Information
Patricia A. Davis
Specialist in Health Care Financing
pdavis@crs.loc.gov, 7-7362
Congressional Research Service
12
and Current Trustees Reports
Year of Trustees Report
|
Year of Projected Insolvency
|
Year of Trustees Report
|
Year of Projected Insolvency
|
Year of Trustees Report
|
Year of Projected Insolvency
|
1970
|
1972
|
1986
|
1996
|
2001
|
2029
|
1971
|
1973
|
1986 (amended)
|
1998
|
2002
|
2030
|
1972
|
1976
|
1987
|
2002
|
2003
|
2026
|
1973
|
None Indicated
|
1988
|
2005
|
2004
|
2019
|
1974
|
None Indicated
|
1989
|
None Indicated
|
2005
|
2020
|
1975
|
Late 1990s
|
1990
|
2003
|
2006
|
2018
|
1976
|
Early 1990s
|
1991
|
2005
|
2007
|
2019
|
1977
|
Late 1980s
|
1992
|
2002
|
2008
|
2019
|
1978
|
1990
|
1993
|
1999
|
2009
|
2017
|
1979
|
1992
|
1994
|
2001
|
2010
|
2029
|
1980
|
1994
|
1995
|
2002
|
2011
|
2024
|
1981
|
1991
|
1996
|
2001
|
2012
|
2024
|
1982
|
1987
|
1997
|
2001
|
2013
|
2026
|
1983
|
1990
|
1998
|
2008
|
2014
|
2030
|
1984
|
1991
|
1999
|
2015
|
1985
|
1998
|
2000
|
2025
|
Source: Intermediate projections of various Medicare Trustees reports, 1970-2014.
Figure 1. Projected Number of Years Until Medicare HI Trust Fund Insolvency
Source: Intermediate projections of various Medicare Trustees reports, 1970-2014.
Notes: No specific estimates were provided by the Medicare Trustees for years 1973-1977 and 1989.
|
There were concerns that the savings achieved through the enactment of BBA 97 were greater than intended at the time of enactment and had unintended consequences for health care providers. As a result of these concerns, Congress enacted two measures (the Balanced Budget Refinement Act of 1999 [BBRA 99; P.L. 106-113] and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 [BIPA 2000; P.L. 106-554]). These measures were designed to reverse some of the BBA 97 spending reductions.
Despite enactment of BBRA 99 and BIPA 2000, which increased program spending, the 2001 and 2002 Medicare Trustees reports continued to delay the projected insolvency date. These improvements in solvency projections reflected both stronger-than-expected economic growth and lower-than-expected program costs due to lower projected enrollment in Medicare Part C, heightened anti-fraud and abuse initiatives, and lower-than-expected increases in health care costs.
The 2003 report projections, however, shifted direction. The projected insolvency date was 2026, four years earlier than the 2030 date projected in the 2002 report. The revision was due to lower-than-expected HI-taxable payroll and higher-than-expected hospital expenditures. In the next year, the 2004 report projected that the HI Trust Fund would become insolvent in 2019, seven years earlier than projected in 2003. A number of factors contributed to the revision of the projected insolvency date, including slow wage growth (on which payroll taxes are based) and faster growth in inpatient hospital benefits. In addition, the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173) added significantly to HI costs, primarily through higher payments to rural hospitals and to private plans under the MA program.11
The 2005 Medicare Trustees report projected that the HI Trust Fund would become insolvent one year later than projected in 2004, in 2020. The revision reflected slightly higher income and slightly lower costs in 2004 than previously estimated. The 2006 report moved the insolvency date forward again, to 2018. The revision reflected expectations of slightly higher costs and increased utilization of HI services.
Both the 2007 and 2008 reports projected a 2019 insolvency date, although the 2008 report indicated that insolvency would occur earlier in the year. The 2009 report moved the insolvency date forward to 2017, due primarily to the economic recession.
The 2010 Medicare Trustees report, issued subsequent to the enactment of the ACA, estimated that the combination of lower Part A costs12 and higher payroll tax revenues expected to result from the ACA would postpone depletion of the HI Trust Fund's assets until 2029, 12 years later than the date projected in the 2009 report. Although the Medicare Trustees noted that the financial outlook for the Medicare program appeared to have improved as a result of the ACA, they cautioned that the projections in the report were more uncertain than normal, due to the potential for some of the expenditure reductions not to materialize. As such, the actuaries of the Centers for Medicare & Medicaid Services (CMS) issued a supplemental memorandum that explained and quantified the potentially higher costs than those estimated in the 2010 Medicare Trustees report.13 This "illustrative alternative" projected that the HI Trust Fund would become insolvent in 2028, one year earlier than that projected in the 2010 trustees report.
The Medicare Trustees 2011 projected that the HI Trust Fund would become insolvent in 2024, five years earlier than projected in the 2010 report. The worsening financial outlook was primarily due to lower-than-expected payroll taxes stemming from higher-than-expected unemployment and slow wage growth in 2010. The 2012 trustees report projected the same 2024 insolvency date. The trustees expected that income from payroll taxes would increase at a faster rate than expenditures through 2018 due to the projected economic recovery, the application of an additional 0.9% HI payroll tax for high-income workers beginning in 2013, and the 2% reduction in spending required by the Budget Control Act of 2011 (BCA; P.L. 112-25) from 2013 through 2021;14 however, income was still expected to be insufficient to fully cover projected HI expenses during that period. The 2011 and 2012 illustrative alternatives also projected that the HI Trust Fund would become insolvent in 2024, although earlier in the year than under the current law scenario.15
In their 2013 report, the Medicare Trustees projected a somewhat better short-term outlook for the HI Trust Fund. They moved the insolvency date two years later than their 2012 estimate, to 2026. The improved projections were primarily due to lower-than-expected expenditures in 2012, the base year used to project future expenditures, and a larger-than-estimated impact of ACA payment methodology changes on MA costs.16 The illustrative alternative projected trust fund insolvency date was the same as that under the current law scenario, 2026; however, the under the illustrative alternative the trust fund was expected to be depleted somewhat earlier in the year.
Current Insolvency Projections
In their 2014 report,17 the Medicare Trustees project a somewhat better short-term outlook for the HI Trust Fund and have therefore moved the insolvency date four years later than their 2013 estimate, to 2030 (from 2026 in the prior report). The 2014 trustees report estimates that in the short term, expenditures will continue to exceed income through 2014, and that from 2015 through 2022, the fund will run a slight surplus. (See Table A-1.) Beyond 2022, expenditure growth is expected to again outpace growth in income. At that time, trust fund assets would be used to make up the difference between income and expenditures, until the assets are depleted in 2030. (See Figure 2.)
Figure 2. HI Trust Fund Assets at Beginning of Year as a Percentage of Annual Expenditures
(estimates from 2009-2014 Medicare Trustees reports)
Sources: Data from the Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and the Federal Supplementary Medical Insurance Trust Funds, Table II.E1, and Summaries of the 2010 through 2014 Annual Reports of the Social Security and Medicare Boards of Trustees, Chart D (2010 and 2011) and Chart E (2012, 2013 and 2014).
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Similar to years 2010 through 2013, the CMS actuaries issued an illustrative alternative scenario that assumed that certain ACA changes that reduce Part A provider reimbursements would be made through 2019 and then gradually phased out starting in 2020.18 This alternative projection suggests higher total Medicare spending levels than the report's baseline figures and a slightly earlier HI Trust Fund depletion date of 2029.
What Would Happen If the Fund Became Insolvent?
The practical function of the HI Trust Fund is to permit the continued payment of bills in the event of a temporary financial strain (e.g., lower income or higher costs than expected) without requiring legislative action. As long as the HI Trust Fund has a balance (i.e., there are securities credited to the fund), the Treasury Department is authorized to make payments for Medicare Part A services. If the trust fund is not able to pay all current expenses out of current income and accumulated trust fund assets, the trust fund is considered to be insolvent.19
To date, the HI Trust Fund has never become insolvent. There are no provisions in the Social Security Act that govern what would happen if that were to occur. For example, there is no authority in law for the program to use general revenue to fund Part A services in the event of such a shortfall.
In their 2014 report, the Medicare Trustees project that the HI Trust Fund will be exhausted in 2030. At that time, HI would continue to receive tax income from which some benefits could be paid; however, funds would only be sufficient to pay for 85% of Part A expenses. Unless action is taken prior to that date to increase revenues or decrease expenditures (or some combination of the two), Congress may face a legislative decision regarding whether, and/or how, to provide for another source of funding (e.g., general revenues) to make up for these deficits.
Financing Issues
Much of the concern about the financial status of Medicare tends to focus on the HI Trust Fund date of insolvency, when Medicare no longer has the authority to pay for Part A health care services in full. This focus can, however, detract from the larger issues confronting the Medicare program as a whole and from the program's current and future impact on the federal budget and on taxpayers. When viewed from the perspective of the entire federal budget, as the number of beneficiaries and per capita health care costs continue to grow, total Medicare spending obligations (HI and SMI spending combined) are expected to place increasing demands on federal budgetary resources. For example, changes to the physician sustainable growth rate payment system to prevent scheduled cuts in Medicare payments to doctors beginning in April 2015 would require significant additional federal funding. However, because payments to physicians are made through the SMI Trust Fund, which is funded through premiums and general revenues, these additional expenditures would have little to no effect on estimates of Medicare solvency (which reflects only expected HI Trust Fund spending).
Operation of the Hospital Insurance Trust Fund
Beginning in 2004, expenditures began exceeding tax income (from payroll taxes and from the taxation of Social Security benefits). Expenditures began to exceed total income (tax income plus all other sources of revenue) in 2008, and Hospital Insurance (HI) assets (the balance of the HI Trust Fund at the beginning of the year) were used to meet the portion of expenditures that exceeded income. Expenditures have exceeded income every year since then and are expected to continue doing so through 2014. Although the trust fund is projected to run a small surplus in years 2015 through 2022, after that time expenditures are expected to again exceed income, with trust fund assets making up the difference until the asset balance is depleted in 2030. At that time, the trust fund will no longer have sufficient funds to allow for the full payment of Part A expenditures (see Table A-1, below, for historical and projected Medicare financial data through 2023).
Table A-1. Operation of the Hospital Insurance Trust Fund,Calendar Years 1970-2023
($ in billions)
Year
|
Income
|
Expenditures
|
Trust Fund
|
Payroll Taxes
|
Interest, Transfers, Othera
Total
|
Benefit Payments
|
Admin. Expenses
|
Total
|
Net Change
|
Balance at End of Year
|
Historical Data
|
2010
|
Intermediate Estimate
|
221.6
|
34.3
|
255.9
|
265.0
|
4.5
|
269.5
|
−13.6
|
191.7
|
245.2
|
36.8
|
281.9
|
265.0
|
5.0
|
269.9
|
12.0
|
203.8
|
260.3
|
39.9
|
300.3
|
277.9
|
5.4
|
283.2
|
17.1
|
220.8
|
276.6
|
43.9
|
320.4
|
293.4
|
5.8
|
299.2
|
21.2
|
242.0
|
293.8
|
48.2
|
342.0
|
315.8
|
6.2
|
322.0
|
20.0
|
262.0
|
310.0
|
52.8
|
362.9
|
335.6
|
6.6
|
342.3
|
20.6
|
282.6
|
326.3
|
57.6
|
383.9
|
359.3
|
7.1
|
366.3
|
17.5
|
300.1
|
342.7
|
62.2
|
404.9
|
384.3
|
7.5
|
391.9
|
13.0
|
313.2
|
359.3
|
66.6
|
425.9
|
411.1
|
8.0
|
419.1
|
6.8
|
319.9
|
375.8
|
71.3
|
447.0
|
438.7
|
8.5
|
447.2
|
−0.2
|
319.8
|
Source: Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Table III.B4, July 28, 2014, at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2014.pdf. (Hereinafter 2014 Medicare Trustees Report.)
Notes: Sums may not equal totals due to rounding.
a.
Includes income from the taxation of Social Security benefits, Railroad Retirement account transfers, premiums paid by voluntary enrollees, and interest.
Historical Payroll Tax Rates
Table B-1. Tax Rates and Maximum Tax Bases
Calendar Year
|
Maximum Tax Base
|
Tax Rate (percentage of taxable earnings)
|
Employees and Employers, Each
|
Self-Employed
|
1966
|
$6,600
|
0.35%
|
0.35%
|
1967
|
6,600
|
0.50
|
0.50
|
1968-71
|
7,800
|
0.60
|
0.60
|
1972
|
9,000
|
0.60
|
0.60
|
1973
|
10,800
|
1.00
|
1.00
|
1974
|
13,200
|
0.90
|
0.90
|
1975
|
14,100
|
0.90
|
0.90
|
1976
|
15,300
|
0.90
|
0.90
|
1977
|
16,500
|
0.90
|
0.90
|
1978
|
17,700
|
1.00
|
1.00
|
1979
|
22,900
|
1.05
|
1.05
|
1980
|
25,900
|
1.05
|
1.05
|
1981
|
29,700
|
1.30
|
1.30
|
1982
|
32,400
|
1.30
|
1.30
|
1983
|
35,700
|
1.30
|
1.30
|
1984
|
37,800
|
1.30
|
2.60
|
1985
|
39,600
|
1.35
|
2.70
|
1986
|
42,000
|
1.45
|
2.90
|
1987
|
43,800
|
1.45
|
2.90
|
1988
|
45,000
|
1.45
|
2.90
|
1989
|
48,000
|
1.45
|
2.90
|
1990
|
51,300
|
1.45
|
2.90
|
1991
|
125,000
|
1.45
|
2.90
|
1992
|
130,200
|
1.45
|
2.90
|
1993
|
135,000
|
1.45
|
2.90
|
1994-2012
|
no limit
|
1.45
|
2.90
|
2013 and later
|
no limit
|
1.45
|
2.90
|
Source: 2014 Medicare Trustees Report, Table III.B2.
Note: Beginning in 2013, workers pay an additional 0.9% of their earnings above $200,000 (those who file individual tax returns) or $250,000 (those who file joint tax returns).
Author Contact Information
[author name scrubbed], Specialist in Health Care Financing
([email address scrubbed], [phone number scrubbed])
Footnotes
1.
|
For additional information on the Medicare program, see CRS Report R40425, Medicare Primer, coordinated by [author name scrubbed] and [author name scrubbed].
|
2.
|
Payments are made for beneficiaries enrolled in Part C in appropriate portions from the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds.
|
3.
|
Medicare Trustees reports may be found at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html.
|
4.
|
For further information on Medicare financing, see CRS Report R43122, Medicare Financial Status: In Brief, by [author name scrubbed], and CRS Report R41436, Medicare Financing, both by [author name scrubbed].
|
5.
|
Prior to 1991, the upper limit on taxable earnings was the same as for Social Security. The Omnibus Budget Reconciliation Act of 1990 (OBRA 90; P.L. 101-508) raised the limit in 1991 to $125,000. Under automatic indexing provisions, the maximum was increased to $130,200 in 1992 and $135,000 in 1993. The Omnibus Budget Reconciliation Act of 1993 (OBRA 93; P.L. 103-66) eliminated the upper limit entirely beginning in 1994.
|
6.
|
See archived CRS Report R41128, Health-Related Revenue Provisions in the Patient Protection and Affordable Care Act (ACA), by [author name scrubbed], for additional detail.
|
7.
|
Since 1994, the HI Trust Fund has had an additional funding source; OBRA 93 increased the maximum amount of Social Security benefits subject to income tax from 50% to 85% and provided that the additional revenues would be credited to the HI Trust Fund.
|
8.
|
There are about 200 federal trust funds. For additional information on how federal trust funds operate within the context of the federal budget, see CRS Report R41328, Federal Trust Funds and the Budget, by [author name scrubbed].
|
9.
|
Unlike marketable securities, special issues can be redeemed at any time at face value. Investment in special issues gives the trust funds the same flexibility as holding cash.
|
10.
|
The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) established the Medicare + Choice program under Part C. Medicare Part C was changed to Medicare Advantage by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173).
|
11.
|
The Part D outpatient prescription drug program, which was created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173), is funded under SMI; the increased expenditures associated with this new benefit therefore had little impact on projections of Medicare (HI) solvency.
|
12.
|
The expected reductions were primarily due to productivity adjustments to Part A provider payment updates and reduced payments to Medicare Advantage plans.
|
13.
|
Memo from John D. Shatto and M. Kent Clemens, "Projected Medicare Expenditures Under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers," August 5, 2010, at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads//2010TRAlternativeScenario.pdf.
|
14.
|
Subsequent legislation extended the reductions for an additional two years, through FY2023. For additional information on the Budget Control Act of 2011 (BCA; P.L. 112-25) and required spending reductions, see CRS Report R41965, The Budget Control Act of 2011, by [author name scrubbed], [author name scrubbed], and [author name scrubbed] and CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules, coordinated by [author name scrubbed].
|
15.
|
The 2011-2014 alternative projections may be found at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/alternativePartB.html.
|
16.
|
See CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline, coordinated by [author name scrubbed].
|
17.
|
Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, July 28, 2014, at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2014.pdf.
|
18.
|
Memo from John D. Shatto and M. Kent Clemens, "Projected Medicare Expenditures under Current Law, the Projected Baseline, and an Illustrative Alternative Scenario," August 28, 2014 (corrected version), at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2014TRAlternativeScenario.pdf.
|
19.
|
From time to time, it is reported that Medicare is on the verge of "bankruptcy"; however, in the context of federal trust funds, this term is not meaningful. It is true that a trust fund's outgo can be greater than its income and trust funds can have a zero balance, but, unlike private businesses, the federal government is not in danger of "going out of business" or having its assets seized by creditors. As noted, Congress has often taken actions to increase a trust fund's revenues or reduce its outgo when the Medicare HI Trust Fund has faced imminent insolvency.
|