Another year, another summary of the Medicare Trustees Report from the New Horizons team!
After all, it’s a few hundred pages long, and who has time for that?
Join us for all the key highlights, including the new estimated depletion date, Medicare Advantage trends, and Medicare numbers over time.
→ Read the full, official report from CMS: 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds
New to the industry? Start here: Step-by-Step Guide to Getting Started In Medicare Sales
Highlights From the 2024 Medicare Trustees Report
Each year, we read the report and summarize it as briefly as we can. If you're short on time and can't read this full article, here's the gist.
Medicare Part A (the HI trust fund) is projected to be depleted by 2036 (p. 7). At that point, it is estimated that HI revenues will cover 89% of incurred program costs, leaving a funding gap that would require legislative action to address.
The whirlwind that was COVID-19 has mostly passed, but the trustees still make three pandemic-related adjustments to their projections: 1) accounting for continued morbidity improvements through 2029, 2) revising inpatient and SNF spending growth factors due to the end of the 3-day stay waiver, and 3) increasing the home health spending growth factor by 2.9 percentage points annually from 2024 to 2026 to reflect ongoing staffing shortages.
Medicare Advantage continues to grow – 48.2% of beneficiaries have it now, and 57.1% are expected to choose MA by 2032 (p. 158).
If you want a little more than that, you can read some more in-depth information from the report below. Don’t worry – we’ve translated the report into layman’s terms so you can quickly understand what’s going on.
Inflation Reduction Act Impact
The trustees share that Medicare projections have been significantly impacted by the Inflation Reduction Act of 2022 (IRA). They state, "The law takes several years to implement, resulting in very different effects by year" (p. 2).
They continue:
"Part D ultimately generates cost savings at the end of the 10-year period, but many of the gains from negotiated prices and lower trends are initially more than offset by increased benefits and decreased manufacturer rebates. [...] [O]ver the next 10 years, aggregate benefits are projected to increase at a rate of 6.3 percent annually, on average, while the average per capita rate of growth is projected to be 3.5 percent."
In sum:
- Part B Drugs: The IRA's negotiated prices are expected to reduce government expenditures for Part B drugs significantly, with these provisions lowering costs over time.
- Part D Drugs: Expenditures for Part D are expected to increase from 2027 to 2030 due to expanded benefits and decreased rebates, with cost savings projected to begin in 2031.
Healthcare Tech Is Advancing
Making cost projections is more challenging than ever because healthcare technology is moving at lightning speed. The Board explains in this report that looking out more than several decades is nearly impossible because of new interventions, procedures, and therapies.
From the completion of the human genome draft to cutting-edge cancer treatments, some incredible medical breakthroughs are changing the way conditions and diseases are treated in the 21st century.
Diseases and conditions that aren't curable or treatable today may be handled routinely in the future. While advances in healthcare have increased spending in the past, the Board is optimistic that future improvements might increase efficiency and decrease costs.
The bottom line is... well, we have no idea how costs will change as science evolves.
Medicare Numbers Over Time
It's always nice to be in-the-know, so here's a look at some Medicare enrollment and spending numbers from this year's report compared to the last six years. Bonus: you'll be awesome at Medicare trivia.
Enrollees
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|---|---|---|
| Medicare beneficiaries | 66.7 million people | 65 million people | 63.8 million people | 62.6 million people | 61.2 million people | 59.9 million people | 58.4 million people | 56.8 million people |
| Over age 65 | 59.1 million | 57.1 million | 55.5 million | 54.1 million | 52.6 million | 51.2 million | 49.5 million | 47.8 million |
| Disabled | 7.6 million | 7.9 million | 8.3 million | 8.5 million | 8.7 million | 8.8 million | 8.9 million | 9 million |
| Chose Medicare Advantage | 48% | 45.9% | 43% | 40% | 37.5% | About 36% | Over 34% | Over 32% |
Finances
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|---|---|---|
| Total costs | $1,037 billion | $905.1 billion | $839.3 billion | $925.8 billion | $796.2 billion | $740.6 billion | $710.2 billion | $678.7 billion |
| Total income | $1,024.6 billion | $988.6 billion | $887.6 billion | $899.9 billion | $794.8 billion | $755.7 billion | $705.1 billion | $710.2 billion |
| Income from non-interest income | $1,014.6 billion | $980.7 billion | $882.3 billion | $894.6 billion | $785.7 billion | $745.9 billion | $694.3 billion | $700.4 billion |
| Income from interest earnings | $10 billion | $7.9 billion | $5.3 billion | $5.3 billion | $9.1 billion | $9.8 billion | $9.8 billion | $9.8 billion |
| Assets held in special issue U.S. Treasury securities | Decreased by $12.4 billion to $396.7 billion | Increased by $83.4 billion to $409.1 billion | Increased by $48.3 billion to $325.7 billion | Decreased by $26 billion to $277.3 billion | Decreased by $1.4 billion to $303.3 billion. | Increased by $15.1 billion to $304.7 billion | Decreased by $5 billion to $289.6 billion | Increased by $31.5 billion to $294.7 billion |
Part B and Part D
What has actually happened:
- Over the last 5 years, Part B costs have averaged annual growth of 8.3%
- Over the last 5 years, Part D costs have averaged annual growth of 6.6%
What is projected to happen over the next 5 years:
- Part B costs will grow 8.8%
- Part D costs will grow 8.2%
- The GDP will grow by 4.3% over the next 5 years, which means these health care costs will be rising faster than the economy
(Info taken from Page 8.)
Medicare Advantage
Medicare Advantage continues to gain popularity, with 48% of Medicare beneficiaries choosing MA in 2023.
The Trustees project that the overall participation rate for private health plans will continue to increase— from about 51% in 2024 to about 57% in 2033 (p. 22).
The trustees share that the increases that are expected over the next 9 years are partly due to higher relative rebates that are used to lower premiums and expand benefits (page 158).
Here are a few statistical highlights from the report (page 158):
- SNP enrollment is expected to grow by 17 percent in 2024 after increasing by 24 percent in 2023. In 2025 and later years, the enrollment growth rate for these plans is expected to slow, ranging from 10 percent in 2025 to 2 percent in 2033.
- For LCCP-HMOs, enrollment is expected to remain relatively flat, increasing by 0.4 percent in 2024 following growth of 0.5 percent in 2023.
- For LCCP-PPOs, enrollment is expected to increase by 11 percent in 2024 after growth of 12 percent in 2023.
Estimated Depletion Date
The Trustees still agree that there’s just not enough money to keep funding Medicare.
They estimate that the depletion date for the HI trust fund is 2036, five years later than last year's projection. (To clarify, the HI trust fund is what funds Medicare Part A. Parts B and D are funded separately by the SMI trust fund.)
(Image taken from Page 28.)
Medicare Cost ProjectionsThe report is still really cautious, with tons of disclaimers basically saying that anything can happen despite all these projections: “There is substantial uncertainty in the economic, demographic, and health care projection factors for HI trust fund expenditures and revenues.” (Page 28). In fact, the report says that every year.
But still… things aren’t looking that great for Medicare.
The trustees explain that the changes that need to happen to eliminate the deficit are pretty extreme. They give two options (page 31):
- Payroll tax needs to increase immediately from 2.90% to 3.25%.
- Expenses need to be reduced immediately by 8% (it was 13% last year, so we're moving in the right direction).
They do say that the changes could happen gradually, but they'd have to be higher in that case compared to just doing it immediately.
In other words, Medicare needs to balance the checkbook, and there are only two ways to do it – get more coming in or spend less. Both of which are difficult to do.
