The Medicare Board of Trustees Report for 2022 has recently been published and the news for the most part is pretty good, though there is some bad news too.
The Good News:
- Inflation rates, though they are still high, are not projected to be as high as previous years.
- Premiums going into 2023 should remain constant from 2022.
- The Part B and Part D Trust Fund (SMI) is “expected to be adequately financed”.
- The Part A Trust Fund (HI) is not projected to be insolvent until 2028.
The Bad News:
- Inflation rates are projected to be higher than the cost-of-living-adjustments (COLA) that the Social Security Administration is projecting (2.4%).
- The Part A Trust Fund (HI) “estimated depletion date” is 2028.
- Morbidity among Medicare beneficiaries is expected to be higher than usual.
Key takeaways from the MBT Report:
- For the short-term future of Medicare, the recent Covid-19 pandemic played a pivotal role as it may have helped the Trust Funds of both Part A and Parts B and D.
- According to the MBT, “the amount of payroll taxes expected to be collected by the HI trust fund was greatly reduced” while spending in specific areas was increased.
- Offsetting the lack of taxes and increased spending is the realization that “spending for services other than COVID-19 was significantly lower than expected in 2020 and 2021”.
- Adding to the benefit of less spending by, according to the MBT, was the data highlighting that “Medicare beneficiaries whose deaths were identified as related to COVID had costs that were much higher than the average Medicare beneficiary prior to the onset of the pandemic”.
It would seem that the Trustees are stating that those Medicare beneficiaries who succumbed to Covid-19 tended to be more costly. With their untimely passing the Trust Funds within Medicare may be in better shape as their previous “high” costs will no longer need to be met.
Compounding this astute observation, the Trustees are projecting:
- That for the remainder of 2022 the “non-COVID-related spending will be lower than previously expected for the beginning of 2022”.
- “For the latter part of 2022 and 2023, the return of deferred care that is assumed to be more intensive, and thus more costly, results in spending that increases to a level that is closer to the pre-pandemic expectations”.
- “That health care spending patterns will return to pre-pandemic levels in 2024 but that the lingering morbidity effects will continue through 2028”.
- “The estimated depletion date for the HI trust fund is 2028, 2 years later than projected in last year’s report. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years”.
The Trustees’ solution to offset this demise of the Part A Trust Fund (HI) is for the current Administration and Congress to pass legislation that will immediately increase revenue for Medicare.
“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.”
What all this means for the costs Medicare beneficiaries can expect to incur through 2031 are:
From 2022 to 2023:
- All rates for Medicare Part A and Part B are expected to remain constant.
- This does not reflect what the premiums and deductibles may be for Supplement Plans (Medigap), Part D (drug coverage) and Medicare Advantage Plans (Part C). Private health insurers determine the costs of these parts of Medicare.
From 2023 to 2031:
- 2.74% – Part A Deductible and Co-Insurance.
- This directly impacts the premiums within Supplemental Plans (Medigap) and costs for this coverage may increase higher.
- 6.02% – Part B Premium.
- 6.28% – Part B Deductible.
- 4.53% – Part D Deductible.
- Medicare’s Part D Deductible amount is the maximum private health insurers can charge per plan.
- The MBT is calling for The Part D Deductible to increase to $505.00 in 2023 and up to $720.00 by 2031.
What about IRMAA?
The Trustees do not establish the income thresholds within IRMAA, but they do estimate what the surcharges may be in the future. Those estimations track the current projections of the Medicare Part B premium.
For the Part D surcharge, the Trustees are estimating that there will be a decrease in 2023 from 2022. After 2023 the estimates have the Part D surcharges increasing by less than 4.00% from 2023 to 2031.
In terms of previous Trustees reports the 2023 report is showing signs of positivity. The projected rates of inflation rates have decreased from previous years and the subject of insolvency, when it comes to the Medicare program, is being pushed further out.
When it comes to what today’s and tomorrow’s Medicare beneficiaries can expect to pay in costs the wild card is how the current Administration along with Congress will interpret the Trustees’ request for changes.
There are 4 options our politicians can use to ensure the solvency of the Medicare program which are:
- Raise taxes across the board on everyone.
- This may not be politically feasible as the electorate may not tolerate higher taxes.
- Reimburse healthcare professionals at a lower rate.
- Historically when payments are decreased to healthcare providers the result, typically, is an overall increase in rates the next year. Any increase in rates charged by healthcare providers may not help the Medicare Trust Funds in the near future.
- Increase Medicare Part A and B premiums and costs.
- The biggest issue with increasing premiums is the obligation some States have with their retired public employees. For some States, past contracts with public employees call for the State to cover the majority of those employees’ health coverage costs. This is Medicare. A too large of an increase in premiums may bring those States to a point close to insolvency too.
- Alter the IRMAA brackets so those who reach it pay higher costs.
- The Trustees are estimating that only about 13.5% of all Medicare beneficiaries will be affected by IRMAA by 2031.
- Past Presidential Administrations have enacted legislation to ensure that this percentage would be 25% by this time.
- By doubling the amount of those impacted by IRMAA Medicare could possibly gain another $63.6 billion by 2031 which would significantly help the program.
Again, there is some positive news in the arena of Medicare. The bad news is that Medicare is still going broke, just not as fast as once determined.
They only question to ask now is:
What will Congress and the current Administration do to you to save the program?
Your health is your greatest asset, the time to plan for it is today.