Medicare Solvency and Unsustainability of Medicare

The relationship between Medicare and social security is a strong one.

Medicare is not all financed in the same way thoughout as Medicare has multiple parts to it. The solvency issue comes from how 1 part of Medicare (Part A) is financed by hospitalization and is funded mainly by payroll tax.

It is important for the proper medical information to be sorted out before applying for social security and this is where a social security disability attorney can help.
The hospital fund always has a projected insolvency date, as it balances payroll tax receipts against hospital costs. The insolvency date fluctuates a great deal; since 1970, it has been as close as two years away to as far as 28 years into the future.

The Congressional Budget Office projects that the fund will be drained in 2024. Before the pandemic, Medicare’s trustees projected that the fund would be exhausted in 2026, but the job losses stemming from the pandemic have reduced tax receipts.

If the trust fund is drained, Medicare would have resources to pay just 90% of expected costs, and the fund’s ability to pay bills would deteriorate further from there.

Congress will need to make decisions sooner rather than later how to fix the problem, in the past, legislative fixes often have relied on reductions in payment rates to health care providers or by increasing payroll tax rates. Medicare’s outpatient and prescription drug programs are in what can be could a “safe zone” when it comes to solvency issues. These parts of Medicare are financed by general government revenue and beneficiary premiums, and are adjusted annually to meet program costs, so neither face solvency problems.