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Medicare Trust Fund

The Medical Trustees recently released their annual report on the Hospital Insurance (HI) trust fund and the Supplementary Medical Insurance (SMI) trust fund. The Medicare program covered around 55.3 million individuals last year; among which, 32% were enrolled for Medicare Advantage plan. Around 44.3 million individuals under the plan were above the age of 65, while the rest were eligible for the program due to their disabilities.

Medicare’s total expenses were estimated to $646.7 billion, whereas the total income of the program was $644.4 billion. The Board of Trustees estimated that the Medicare cost would increase up to 3.6% of the total GDP under current laws by the year 2040, and by 2090, the percentage will accelerate up to 6%. However, if the ACA implementation fails, or any other issue lets Medicare go beyond the set laws, then the cost may reach 6.2% of the total GDP by 2040, and to 9.1% by the year 2090.

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Federal Funding

The Medicare fund reports suggest that the expenses of the Hospital Insurance trust fund has been exceeding its total income since 2008. The average yearly expense for HI in the past five years is 2.4%, which is expected to grow to an alarming 5.8 percentage over the next five years. In light of these events, CMS has moved the year of asset depletion from 2030 to 2028 for the HI fund, which implies the worsening of the Medicare’s financial status.

The income of HI will reach 6% over the next five years, which indicates a slight 0.2% increase in the total average income over the last five years. There are predications that HI will earn surpluses from 2016-2020; however, the HI fund will have to run on a shortage from 2020 up to its depletion in 2028.

SMI, on contrary, has not experienced any difficulties in the financial division. The last five years has witnessed an annual growth of 5.6 and 7.7 percentages in the cost of Medicare Parts B and D respectively. Furthermore, the Part B and D costs is expected to increase by 6.9% and 10.6% respectively in the next five years. The Medical Trustees report highlights that as SMI’s expenses are growing, there won’t be any funding shortages in this segment.

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