Filed Under:Health Insurance, Medicare

Trustees: Medicare about 22% short

The present value of future spending is $21 trillion. The present value of the gap is $4.6 trillion.
The present value of future spending is $21 trillion. The present value of the gap is $4.6 trillion.

The estimated present value of the cash needed to keep the Medicare hospitalization fund solvent over the next 75 years has fallen to $4.9 trillion this year, from $5.4 trillion a year ago.

The new "unfunded obligation" figure amounts to 22 percent of the $21 trillion in benefits Medicare hospitalization fund trustees now expect the fund to have to pay out from 2013 through 2087.

The unfunded obligation is about 1.11 percent of the $428 trillion in taxable payroll that the trustees expect U.S. workers to earn between now and 2087. The trustees call that 1.11 percent figure the hospitalization trust fund's "actuarial balance."

The Medicare program trustees have given the new figures in their 2013 annual report.

A year ago, in the 2012 annual report, trustees were estimating that the trust fund would pay about $21 trillion in benefits from 2012 through 2086, and that Americans would earn $411 trillion in taxable payroll over that period.

The actuarial balance figure given in the 2012 report was 1.35 percent.

The trustees are now expecting U.S. workers to pay $14 trillion in payroll taxes over the 75-year projection period, up 5 percent from the total they used last year.

The total amount of assets the Medicare trust fund actually has on hand has fallen to  $220 billion, from $244 billion.

The trustees noted that Congress requires them to assume that Congress will allow implementation of several controversial Medicare budget-cutting measures, including a "sustainable growth rate" (SGR) law enacted in 1997 that is supposed to hold increases in Medicare physician pay rates to the same level as the rate of growth of the U.S. gross domestic product (GDP).

Congress has moved year after to year to keep the budget-cutting measures from taking effect.

In "illustrative alternative projections" that assume Congress will continue to keep the budget-cutting measures from taking effect, the latest actuarial balance figure is a deficit equal to 2.17 percent of the 2013-2087 taxable payroll total.

That "alternative projections" actuarial balance deficit is down from 2.43 percent a year ago.

Actuaries at Milliman estimated recently that, in April, another type of post-retirement benefits mechanism -- traditional defined-benefit pension plans at the 100 largest companies -- had a 18.8 percent gap between the market value of the assets in the plans and the assets needed to fund the $1.7 trillion in projected benefits obligations, up from 17.1 percent a year earlier.

At the Medicare Part A fund, the biggest source of improvement in the actuarial balance was data suggesting that Medicare enrollees will end up being a little healthier and making a little less use of skill nursing facility care than than the data used a year ago suggested, the trustees said.

Successful efforts to hold down Medicare Advantage plan spending could help, too., the trustees said.

"In this year's report, the Medicare Advantage plan bid assumptions were lowered to  reflect recent data suggesting that certain provisions of the [Patient Protection and Affordable Care Act (PPACA)] will reduce growth in these costs by  more than was previously projected," the trustees said. "The impact on the  actuarial balance of this assumption change and other  minor changes is +0.07 percent of taxable payroll."

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