What You Actually Need to Know From the 2019 Medicare Trustees Report

It's officially a tradition! Every year, we put out a summary of the annual Medicare Trustees Report. After all, it’s a few hundred pages long, and who has time for that?

Now that we have a few years under our belts, we also make comparisons from this report to years past. Is Medicare getting worse, staying the same, improving? Does President Trump have anything to do with some of the changes?

Learn all the often horrifying details here. Sorry to be a downer, but it's no secret that Medicare's a bit shaky these days.

Read the official 2019 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: Medicare Basics for New Senior Market Insurance Agents

Highlights From the 2019 Medicare Trustees Report

Each year, we read the report and summarize it into one paragraph for you. If you're short on time, here's the gist.

Medicare Part A is expected to run out of money by 2026, which is the same as what was estimated last year. For Medicare Part B and D, the finances are looking fine because the premiums are set each year to cover expected costs. In fact, Part D costs are down due to higher rebates and slower drug price increases. So there's at least something. For Part A, the trustees are recommending a payroll tax hike or a massive cost in expenses. Medicare Advantage is really gaining steam – over 36% of beneficiaries have it now, and it's growing year over year. 

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 all the lawyer-speak into layman’s terms so you can quickly understand what’s going on.

The Numbers From 2018 Compared to 2016 and 2017

Having a handle on how many people are enrolled in Medicare and what some of the finances look like will keep you informed. Plus, you'll be awesome at Medicare trivia.

Here are some of the numbers from this year’s report compared to the previous two years. Just to clarify, the 2019 Medicare Trustees Report is reporting on data from 2018, and last year’s report was reporting on data from 2017, and so on.

Enrollees

2018 2017 2016
 Medicare covered 59.9 million people Medicare covered 58.4 million people Medicare covered 56.8 million people
51.2 million were 65+ 49.5 million were 65+ 47.8 million were 65+
 8.8 million were disabled 8.9 million were disabled 9 million were disabled
 About 36% of these people chose to enroll in Medicare Advantage Over 34% of these people chose to enroll in Medicare Advantage  Over 32% of these people chose to enroll in Medicare Advantage

(Data in the table is taken from Page 6 of this year's report and Page 7 of the other reports.)


Finances

2018 2017 2016
Total costs were $740.6 billion Total costs were $710.2 billion Total costs were $678.7 billion
Total income was $755.7 billion Total income was $705.1 billion Total income was $710.2 billion
$745.9 billion of the income was from non-interest income $694.3 billion of the income was from non-interest income $700.4 billion of the income was from non-interest income
$9.8 billion of the income was from interest earnings $9.8 billion of the income was from interest earnings $9.8 billion of the income was from interest earnings
Assets held in special issue U.S. Treasury securities increased by $15.1 billion to $304.7 billion Assets held in special issue U.S. Treasury securities decreased by $5 billion to $289.6 billion Assets held in special issue U.S. Treasury securities increased by $31.5 billion to $294.7 billion

(Data in the table is taken from Page 6 of this year's report and Page 7 of the other reports.)

Part B and Part D

What has actually happened:

  • Over the last 5 years, Part B costs have averaged annual growth of 6.6%
  • Over the last 5 years, Part D costs have averaged annual growth of 6.3% (less than last year)

What is projected to happen:

  • Part B costs will grow to 8.3% over the next 5 years
  • Part D costs will grow to 7.3% over the next 5 years
  • The economy will grow by 4.7% over the next 5 years, which means these health care costs will be rising faster than the economy

(Taken from Page 7.)

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 2026 – the same as what was estimated last year. (To clarify, the HI trust fund is what funds Medicare Part A. Parts B and D are funded separately by the SMI trust fund.)

Medicare-report-2019-fund-balance

(Image taken from Page 25.)

Does Donald Trump Have an Impact on Medicare?

It's not stated in the actual report, but the press release from CMS explains that President Trump may actually help Medicare.

His 2020 Budget – if enacted – would strengthen the fiscal integrity of the Medicare program and extend its solvency. CMS says that because of Trump, they've introduced a ton of new initiatives to keep Medicare going and improving. That includes:

  • Increasing Medicare Advantage choices
  • Adding supplemental benefits to the program
  • Offering more care options for people with diabetes
  • Providing new telehealth services
  • Lowering prescription drug costs for seniors
  • Working to increase price transparency and help people compare costs between different doctors and hospitals

Medicare Cost Projections

The 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 26). In fact, the report says that every year.

But still… things aren’t looking that great for Medicare.

They explain on page 28 that the changes that need to happen to eliminate the deficit are pretty extreme. Payroll tax needs to increase immediately from 2.9% to 3.81% or expenses need to be reduced immediately by 19%. As you can tell, that's not so realistic.

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's only two ways to do it - get more coming in or spend less. Both of which are difficult to do.

It just goes to show that sometimes, the phrase “too good to be true” – no premiums for Medicare Part A – might just have some merit after all.

Other Medicare-related articles you might like:

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