Slashing provider dollars, raising taxes could help shore up Medicare Part A trusts

What can be done to ensure the Medicare hospital insurance trust fund does not run out before 2026? Cutting payments to providers and increasing taxes on high-income individuals are among the possibilities, the speaker said Friday in a webinar sponsored by the Health Policy Coalition.

“We have a gap where benefits are higher than earmarked income,” said Dr Josh Gordon, director of health policy at the Responsible Commonwealth Budget Committee. “The way to be solvent is to close the gap. The way to have sustainable solvency is to ensure that once it closes, gap, it will remain closed for a longer period of time.”

Dr Bowen Garrett, senior research fellow at the Urban Institute, explained that Medicare has two separate trusts, the Hospital Insurance (HI) Trust and the Supplemental Medicare Trust (SMI). The HI Trust Fund pays Medicare Part A, which covers inpatient hospital services, hospice, and post-hospital skilled nursing facility and home health services; SMI pays Medicare Part B (including doctor visits and other outpatient facilities) and Part D (including prescription drugs) ). As it stands, the HI Trust is spending more than it earns and is expected to go bankrupt in 2026.

The HI Trust Fund “is funded through a payroll tax on worker income, while SMI is funded approximately 25 percent from beneficiary premiums and 75 percent from general federal revenue,” Garrett continued. So, while SMI’s funding can always be increased by using more general revenue, if the HI Trust becomes insolvent, it “will delay payment to providers for the full cost of services covered by Part A” unless more funds are found. “Medicare can only pay hospitals and other party providers 91 cents for every dollar it owes for patient care.”

Garrett said HI trusts don’t always run into trouble. In fact, “in the early 2000s, [the] Hello [trust fund] More income than expenditure… At its peak in the mid-2000s, trust fund reserves were sufficient to cover expenditures for 1.5 years. The projected deficit is now $364 billion. “As a result, the government will need to raise or borrow more and more money to cover the projected level of spending under the current plan. “

So what can be done? When the Urban Institute posed the question to a group of health insurance experts last year, they believed the most feasible approach “would combine some additional revenue with targeted spending reductions to minimize the impact on beneficiaries,” added Lotter said. Expanding the base of high-income taxpayers who pay Medicare taxes on their investments to include those involved in S corporations and limited partnerships would be a great way to generate additional income, he added.

Dr. Harriet Komisar, senior strategic policy advisor at AARP, said: “While addressing the funding challenges of Part A is absolutely necessary, the situation is neither unique nor dire. That said, it’s better to act sooner rather than later.” She suggested expanding Innovative payment programs to improve the efficiency and value of Medicare programs, including Responsible Care Organization, and Medicare’s Home Independence Program, which allows people to receive primary care services at home.

Reducing overpayments for Medicare Advantage plans is another issue that needs to be addressed, Gordon noted. “We expect that if you have private plans that cover individuals with Medicare Advantage, those plans will be able to control costs better than the unlimited fee-for-service portion of Medicare,” he said. While Medicare Advantage does control costs and save money, it “The government isn’t actually seeing those savings.” He added that shifting Medicare Advantage to a more competitive bidding program could help. “More competition can save us in 10 years and beyond.”

A modern benefit design is another thing to consider, Gordon said, noting that traditional Medicare beneficiaries often pay more than one premium, and there are no out-of-pocket caps for all beneficiaries. “One way to address this is to create a single combined deductible with a uniform cost-sharing and out-of-pocket cap.” He said the idea was floated by Republicans and Democrats, which would allow buying supplements “Medigap” coverage is unnecessary and may make fee-for-service health insurance more attractive.

He went on to say that reforming the way Medicare pays for graduate medical education (GME) — which it currently does through the Part A program — is also another cost-saving option. “There’s debate about how much government should compare to the private sector. There’s also debate about whether this should really be put in Medicare Part A versus general Medicare spending, because doing it through Part A would lead to a kind of excess – Focus on inpatient settings…and private health insurance doesn’t really cost a lot [help with] Medicare education,” Gordon said.

The current GME system also “artificially limits the number of doctors” at a time when it needs to increase supplier supply, he said. Training more doctors “also helps to reduce costs to a certain extent”.

Health equity considerations also need to be part of any health insurance reform, said Dr. Adaeze Enekwechi, operating partner at private equity firm Welsh, Carson, Anderson & Stowe. “Health inequity is a huge driver of excessive cost and excessive waste in the system,” she said. “Medicare can lead the way in health equity.”

There are some signs that the program is focusing on this area, including introducing incentives in some of its payment plans to collect data on social determinants of race and health. The importance of collecting such data “couldn’t be overstated,” she said.