Projecting the future of the biggest federal health care program became much more difficult due to the effect on treatment patterns by the CCP virus, according to the 2021 Annual Report of the Boards of Trustees of the Federal Hospital Insurance (HI) Trust Fund and the Federal Supplementary Medical Insurance (SMI) Trust Fund.
The 273-page report was released on Aug. 31 as the nation’s attention was focused on the completed withdrawal of all U.S. military forces from Afghanistan after 20 years of war in the long-troubled Central Asian country.
But the report is likely to get more attention in the days ahead, as officials in Washington, as well as government officials at the state level, realize the implications of the trustees’ analysis.
Perhaps most significantly, the 2021 report didn’t deviate from the previous year’s projection that the Medicare Trust Fund will be unable fully to fund benefits by 2026. That’s the year the cost of providing benefits exceeds available revenues brought in to cover them, which will likely result in the implementation of benefit reductions.
The trustees noted the effect of the CCP virus, which causes COVID-19, on the program’s operations in 2020 and the uncertainties in projecting future costs and benefits due to the virus, which has reportedly taken more than 660,000 U.S. lives.
“Beginning in 2020, the Medicare program was dramatically affected by the COVID-19 pandemic. The amount of payroll taxes expected to be collected by the HI trust fund was greatly reduced due to the economic effects of the pandemic on labor markets,” the report reads. “Spending was directly affected by the coverage of testing and treatment of the disease. In addition, several regulatory policies and legislative provisions were enacted during the public health emergency that increased spending.”
Among the results was a 20 percent increase in Medicare payments made in connection with hospital admissions due to the disease, the report states.
Somewhat offsetting the increases due to the virus was the slowdown in elective surgeries and other non-COVID-19-related procedures, necessitated by redirecting hospital resources to care for COVID-19 patients.
But the trustees acknowledged that deferred surgeries and procedures will likely return to normal in the next year, with a result that costs for 2022 and thereafter could be higher than presently projected. However, those costs could be lower if the virus causes more deaths than expected, according to the trustees.
“For 2022, the return of deferred care that is assumed to be more intensive results in spending that continues to be higher than previously estimated,” the report reads.
“The trustees have not included any longer-term morbidity impacts, balancing a potential increase in costs due to longer-lasting health needs from those who have had COVID-19 with a potential reduction in costs due to the higher mortality from COVID-19 among those with higher medical spending.”
The trustees also noted that they attempted to account for the long-term costs of COVID-19 vaccines in their projections, but stated that the unpredictability of the virus should also be taken into account.
“The estimates in this year’s report also incorporate the costs of the COVID-19 vaccines, which consist of both the payments for the vaccines themselves and the payments for their administration,” the report reads.
“The trustees expect vaccine utilization to decrease somewhat over time, reflecting the likely reduction in the required number of doses and the possibility that the seriousness of COVID-19 will decrease.
“It should be noted that there is an unusually large degree of uncertainty with these COVID-related impacts and that future projections could change significantly as more information becomes available.”
The HI fund continues to be Medicare’s weakest link and where the effect of the CCP virus is most immediately felt, according to the report.
“In 2020, HI expenditures exceeded income by $60.4 billion due to the large amount of accelerated and advance payments. These payments will be repaid in 2021 and 2022, resulting in a small deficit in 2021 and a surplus in 2022,” it reads.
“After that, the trustees project deficits in all future years until the trust fund becomes depleted in 2026. The assets were $134.1 billion at the beginning of 2021, representing about 48 percent of expenditures projected for 2021, which is below the trustees’ minimum recommended level of 100 percent.
“The HI trust fund has not met the trustees’ formal test of short-range financial adequacy since 2003. Growth in HI expenditures has averaged 7.6 percent annually over the last 5 years, compared with non-interest income growth of 5.2 percent. Over the next 5 years, projected average annual growth Highlights 9 rates for expenditures and non-interest income are 3.1 percent and 4.6 percent, respectively.”
As a result, underlying all of the trustees’ estimates and projections is the continuing reality that the Medicare program, as the largest federal health care third-party payer, faces the bankruptcy of its reserves in less than a decade.
“Current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers,” the report reads.
The 2021 report was signed by Secretary of the Treasury Janet Yellen, who’s the managing trustee of both the HI and SMI funds; Secretary of Labor Marty Walsh; Health and Human Services Secretary Xavier Becerra; and Kilolo Jajakazi, the acting Social Security Administration chief.
Two trustee positions representing the public are vacant, awaiting nominees by President Joe Biden to be confirmed by the Senate.
Congressional correspondent Mark Tapscott may be contacted at: firstname.lastname@example.org. Follow him on Twitter at @mtapscott and on Parler at @Mtapscott.