Trustees: Medicare Hospital Fund Could Run Dry In 2019

The trustees are predicting the hospital insurance fund will be exhausted a few months into 2019.

The federal Supplementary Medical Insurance trust fund, which backs the Medicare Part B physician care and Medicare Part D prescription drug benefits programs, would fare better, because the government re-sets Medicare Part B rates and general revenue support each year, but Medicare Part B and Part D costs are increasing rapidly and soon could consume a much higher percentage of the gross domestic product than they do today, the trustees write.

Congress could repair the imbalance at the hospital insurance fund by immediately increasing the 2.9% payroll tax that funds the program to 6.44%, or by immediately cutting program expenditures about 51%, the trustees write.

"More realistically, the tax and/or benefit changes could be made gradually, rather than immediately, but would ultimately have to reach much more substantial levels to eliminate the deficit," the trustees write.

If Congress phases in tax increases or benefits cuts, taxes could end up being 3 times as high as they are today, or the inflation-adjusted expenditures could be about 66% less than they are today, the trustees write.

The Medicare trust funds continue to be in worse shape than the Social Security funds because they must cope with increases in health care costs as well as the aging of the U.S. population, officials say.

"If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the ability of these programs to support people who depend on them," Treasury Secretary Henry Paulson says in a statement about the trustees' reports. "Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America's future prosperity."