Around this time last year, we put out a summary of the Medicare Trustees Report. After all, it’s a few hundred pages long, and who has time for that?

A lot of our valued agents found that summary useful, so we’ve decided to make this a yearly trend. Consider this your mid-June Medicare holiday.

If you want to read about last year’s Medicare Trustees Report, you can here:

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

Without further ado, let’s get into the summary for this year’s 2018 Medicare Trustees Report.

[RELATED: Medicare Advantage: Why Now, Product Insights, Commission Information, and More]

Highlights From the 2018 Medicare Trustees Report

We know some prefer things short and sweet, so here’s your one paragraph summary if you’re in a hurry:

Medicare Advantage is gaining popularity – over 34% of beneficiaries have it now. Once again, Medicare is spending more than they’re making (about $5 billion more). The Hospital Insurance trust fund is expected to run out of money by 2026, which is 3 years sooner than 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, and yes – we should expect these premiums to continue to rise over the years since healthcare costs are rising faster than the economy. The trustees are recommending that we all consider “further reforms in the near future” – and “with a sense of urgency.”

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 2017 Compared to 2016

If you want to know the numbers from this year’s report (and we’ll also compare them to last year), this part is for you. Just to clarify, the 2018 Medicare Trustees Report is reporting on data from 2017, and last year’s report was reporting on data from 2016.

Enrollees

(Data in the table is taken from Page 7 of last year’s report and Page 7 of this year’s report.)

Finances

(Data in the table is taken from Page 7 of last year’s report and Page 7 of this year’s report.)

Part B and Part D

What has actually happened:

• Over the last 5 years, Part B costs have averaged annual growth of 5.5%
• Over the last 5 years, Part D costs have averaged annual growth of 8.5%

What is projected to happen:

• Part B costs will grow to 8.2% over the next 5 years
• Part D costs will grow to 6.0% 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 8.)

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 – which is 3 years sooner than they 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.)

(Image taken from Page 26.)

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).

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

But that’s not really new information. The trustees explain on pages 29-30 that the cost of healthcare is increasing faster than the income rate… which means all of us are going to feel the strain that medical bills put on us. That includes Medicare.

You can see in the following chart that costs are projected to be a good bit higher than the income rate over the long-term.

(Chart taken from Page 29 of the report.)

This report basically summarizes that at least for Medicare Part A, something will have to give. Taxes aren’t currently high enough to cover the costs, which is why the trustees are recommending some type of reform. And they’re recommending it sooner than later.

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.

Interested in the summary of last year’s report?

Read on to Learn 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.)

(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:

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.