The Treasury Department and the Department of Health and Human Services (HHS) released the 2017 Medicare Trustees Report late this afternoon. The Trustees are projecting that total Medicare costs will grow from approximately 3.6 percent of GDP in 2016 to 5.6 percent of GDP by 2041. In addition, the report projects that the 2018 Part B premium will remain at the 2017 levels.
The Medicare Hospital Insurance Trust Fund Will Be Depleted in 2029
The Medicare Trustees are projecting that the trust fund financing Medicare’s hospital insurance coverage will be depleted in 2029. This is one year later than was projected in last year’s report due to lower spending in
2016, lower projected inpatient hospital utilization and a slightly better projected hospital insurance deficit in 2017 than in 2016. The report notes that the hospital
insurance trust fund has not met the Trustee’s formal test of short-range financial adequacy since 2003.
IPAB Will Not Be Triggered Because Medicare Spending Below Targets
The Independent Payment Advisory Board (IPAB), set up by the Affordable Care Act (ACA), was not triggered because spending levels in Medicare did not exceed its targets. Had the projected rate of growth in Medicare spending per beneficiary exceeded the target rate, IPAB would have been required to submit proposals to the President the following year. Congress and the President could enact legislation overriding IPAB recommendations. Because neither President Obama nor President Trump have nominated any members to comprise the IPAB, responsibility for recommending payment cuts if the targets were exceeded would fall on HHS Secretary Price.
Medicare Spending on Self-Administered Drugs Decreases; Spending Increases for Physician-Administered Drugs
Largely due to the increase in drug manufacturer rebates and lower utilization of hepatitis C drugs, the Part D projections in the report, both short and long-range, are lower than in past years. Conversely, projected Part B costs are slightly higher than in the previous report due to higher-than-expected annual spending for outpatient hospital services and physician-administered drugs in 2016 and a methodological change in payments for patients with end-stage renal disease (ESRD).
Trustees Expect Medicare Spending to Increase Faster than the Economy
The Trustees Report projects that Medicare expenditures will increase in most future years at a somewhat faster pace than workers’ earnings or the economy overall, primarily because the number of beneficiaries is increasing faster than the number of workers and is coupled with a continued increase in the volume of delivered services.
Under current law, the Trustees are projecting an average annual Part B growth rate of 7.8 percent over the next five years and an estimated average annual increase in expenditures of 6.4 percent for Part D. Comparatively, the projected average annual rate of growth for the U.S. economy is 5.2 percent during this period. This is in part due to prescription drug costs rising somewhat more quickly than other medical services.