The Calculations Change – But the Insolvency Dilemma for Medicare and Social Security Remains the Same


The 2023 Medicare Trustees Report showed a positive trend for the Hospital trust fund (Part A) but the Social Security Trustees noted a worsening trend for in their report.  For Social Security, insolvency is coming 1 year earlier than last year (in CY 2032, rather than CY 2033), due to inflation, lowering of the GDP, and labor productivity.

For Medicare, the Hospital trust fund added 3 more years of solvency, moving the point at which all benefits could be paid at current levels from 2028 to 2031.  This improvement was due to “lower projected health-care spending stemming from updated analysis that uses more recent data” or, in other words, they changed the way the assumptions were calculated.

Three other factors helped push out the timeline for the Hospital trust fund:

  1. Those beneficiaries that died from COVID-19 were the sickest with more comorbidities – so the remaining Medicare population is “healthier” as a percentage – which leads to lower overall projected spending.
  1. More dual eligible beneficiaries have been moving into Medicare Advantage plans in the past few years and. as duals are more expensive, this shift has resulted in savings.  The report highlighted that the additional dual-eligible enrollments [in Medicare Advantage] have decreased the average fee-for-service per capita cost– affecting, in turn, the trends for inpatient hospital, SNF, and home health spending..
  1. The Comprehensive Care for Joint Replacement program (CJR) in Medicare has led to a larger than expected shift of knee and hip replacements from inpatient to outpatient care which resulted in savings.

Trustees reiterated that the Medicare pay rates for physicians are not keeping up with inflation and costs, which could affect beneficiaries’ access to care.  American Medical Association President Jack Resneck said, “MedPAC and the Trustees have provided lawmakers with a legislative agenda for this year. Congress should adopt a 2024 Medicare payment update that recognizes the full inflationary growth in health care costs…to ignore this would be malpractice.”

To improve the solvency of the Medicare trust fund, the Trustees urged Congress to act on President Biden’s ideas of increasing taxes for those making over $400,000 and allowing Medicare to negotiate rates on an expanded list of prescription drugs.  House Speaker Kevin McCarthy has said that Biden’s tax proposals are “completely unserious” and that, “Washington has a spending problem, NOT a revenue problem.”

So, is this the year that Congress and the administration address Medicare and Social Security insolvency?  The dilemma remains the same – they can ignore the warnings, or they can increase taxes and/or cut government spending.  We also have the looming debt ceiling to address.  For now, both sides are playing politics.  The Biden Administration has repeatedly said it only wants a “clean” debt ceiling increase knowing full well that they need to work with Congress to make any significant changes to impact the trust funds or raise the debt ceiling.  House Republicans want cuts to spending, and to require these cuts be part of any agreement to raise the debt ceiling.  Although they say Medicare and Social Security are off the table, news agencies have reported that multiple proposals to cut Medicaid are circulating.  House Republicans can’t agree among themselves on what they want, and that 7-vote margin doesn’t make things easy for them.  So, we wait.  And we are pretty sure you’ll have enough time to read the reports before any of these problems are solved.

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