What You Actually Need to Know From the 2017 Medicare Trustees Report

What You Actually Need to Know From the 2017 Medicare Trustees Report

The 2017 Medicare Trustees Report is out — you can read it here. We’ve sifted through it and have brought you both a one paragraph summary along with extra details in case you’re interested.

Quick disclaimer: Most of the information in our summary is taken from Part II of the report, which is the Overview. The other parts, which make up the majority of the report, are full of actuarial analysis and actuarial methodology. That information wasn’t as useful for a summary, but feel free to sift through it if you’d like to do a deeper dive into the numbers.

Let’s get to it.

The Entire Report in One Paragraph

While the 2017 Medicare Trustee’s Report is 257 pages long, I can relay it to you in a single paragraph. No need to grab popcorn and a snack for this one.

Here goes:

Medicare is posing a lot of problems, but this isn’t necessarily “new” information. People are getting older. Health care is advancing rapidly, which means it’s becoming more and more expensive. In sum, Medicare costs are expected to rise pretty significantly over the next few decades. Expect premiums to rise.

The end.

If you want a little more than that, I’ve included some of the main topics from the report.

The Numbers From 2016

If you want to know the numbers from 2016, this part is for you.

Enrollees

  • Medicare covered 56.8 million people
    • 47.8 million were 65+
    • 9 million were disabled
  • Over 32% of these people chose to enroll in Medicare Advantage

(Taken from Page 7.)

Finances

  • Total costs were $678.7 billion
  • Total income was $710.2 billion
    • $700.4 billion of this was from non-interest income
    • $9.8 billion of this was from interest earnings
  • Assets held in special issue U.S. Treasury securities increased by $31.5 billion to $294.7 billion

(Taken from Page 7.)

Part B and Part D

What has actually happened:

  • Over the last 5 years, Part B costs have averaged annual growth of 5.4%
  • Over the last 5 years, Part D costs have averaged annual growth of 8.3%

What is projected to happen:

  • Part B costs will grow to 7.8% over the next 5 years
  • Part D costs will grow to 6.4% over the next 5 years
  • The economy will grow by 5.2% over the next 5 years, which means these health care costs will be rising faster than the economy

(Taken from Page 8.)

And yes, as you’ve probably gathered, Part B premiums are expected to rise next year: “For 2018 and later, financing rates and assets are expected to be increased to restore and maintain an adequate contingency reserve” (Page 33).

Estimated Depletion Date

The Trustees have determined that there’s just not enough money to keep funding Medicare. They estimate that the depletion date for the HI trust fund is 2029. (To clarify, the HI trust fund is what funds Medicare Part A. Parts B and D are funded separately by the SMI trust fund.)

HI Trust Fund Balance

(Image taken from Page 27.)

Last year’s report estimated 2028, so at least we’ve gained a year.

Now, if you think like me, it sounds a little dramatic to assume we’ll run out of money by 2029 when last year, there was $5.4 billion to spare…

Well, the Trustees think we’ll have extra money left over until about 2022, but after that we’ll be returning to deficits until there’s nothing left in 2029. So there you have it.

Now, as far as Parts B and D go, we’re golden. This is because each year, the premium income and general revenue resets to cover expected costs. The Trustees say that we’re definitely good for at least 10+ years.

(Taken from Page 7.)

Medicare Cost Projections

Overall, the report is pretty cautious. There are a ton of disclaimers about the uncertainty of the future, because healthcare costs are really hard to pin down. However, there is a Medicare cost projection that I’ll show below.

If you make a projection using the current law as a basis, Medicare costs are expected to rise from the current level — 3.6% of the GDP — to 5.6% in 2041, and 5.9% by 2091.

However, an illustration was done in which adherence to the MACRA and ACA cost-reducing measures erode. In this illustration, Medicare costs would be expected to rise to 6.2% in 2041, and 9% in 2091.

Here is that chart:

Medicare Cost Projections

Again, the Trustees want you to know that projections are hard to do accurately, so take this with a grain of salt.

(Taken from Page 4.)

Long story short: health care is expensive and premiums will rise.


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