Report Finds Medicare Could Run Out of Funds as Early as 2022

A report from Medicare’s trustees in April 2020 estimated that the program’s Part A trust fund, which subsidizes hospital and other inpatient care, would begin to run out of money in 2026. At the time, the trustees cautioned that their calculations did not include the potential impact of COVID-19.

Now, experts have conducted follow-up projections on the viability of the Part A trust to account for the impact of the pandemic and found that the fund might become insolvent even earlier.

The Part A trust is largely funded from the 1.45% payroll tax paid by employees and employers, and pandemic-related job losses have decreased the cash flow into the fund. David Shulkin, MD, a senior fellow at the Leonard Davis Institute of Health Economics at the University of Pennsylvania, estimates that, even with a conservative estimate of pandemic-related decreases in payroll taxes, the fund could become insolvent, or unable to pay out for health care coverage, as early as 2022 or 2023.

Another projection done by the Committee for a Responsible Federal Budget, a nonpartisan group that works on fiscal policy, estimates that the pandemic will cause the Part A trust fund to become insolvent starting in late 2023 or early 2024.

“I think we have a real, impending health care crisis,” said Dr. Shulkin, who is a former Secretary of the Department of Veterans Affairs. “I think this is something that needs more immediate attention.”

Source: NPR, July 21, 2020.