Medicare Financing
In Brief: The Trustees' 1999 Report on the Status of the Medicare Hospital Insurance (HI) Trust Fund
Research Report
Craig Caplan, AARP Public Policy Institute
February 1999
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The Trustees of the Federal Hospital Insurance Trust Fund reported in their 1999 annual report to Congress on the financial health of the Medicare Hospital Insurance (HI) program for the short- and long-term. Their key findings follow.
Short-term Financial Status
- The Trust Fund's short-term picture has improved substantially since the 1998 annual report. This improvement is largely due to slower growth in Part A spending and faster growth in revenues than previously projected.
- The Trust Fund is now projected to be exhausted in 2015, seven years later than projected in the 1998 Trustees' report.
- The estimates are sensitive to changes in actuarial assumptions. Under pessimistic assumptions, the Trust Fund would be depleted in 2007. Under optimistic assumptions, annual trust fund income will continue to exceed costs beyond 2008 (The Trustees do not provide a date for expected insolvency under this scenario).
Long-term Financial Status
- The projected long-term shortfall (75 years) has been reduced by almost one-third from the 1998 projections, and by two-thirds since before passage of the Balanced Budget Act of 1997.
- Despite this improved outlook, revenues will continue to be less than what will be needed to pay Part A costs over the long-term.
- Bringing the HI Trust Fund into actuarial balance over the next 25 years would require either reducing outlays by 11 percent or increasing income by 12 percent (or some combination of the two) over a 25-year period. Substantially greater changes in income and/or outlays are needed to achieve actuarial balance over a 75-year period.
Conclusions
- The Trustees urge policy makers to use the time gained by the later depletion of the HI Trust Fund to determine effective solutions to the remaining long-term problems. They also recommend that further reforms occur in the relatively near future.
Top of PageSource
1999 Annual Report of the Board of Trustees of the Federal Hospital Insurance (HI) Trust Fund.
Written by Craig Caplan, Normandy Brangan, and David Gross, AARP
Public Policy Institute
March 1999
©1999 AARP
May be copied only for noncommercial purposes and with
attribution; permission required for all other purposes.
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Pub ID: INB13