Medicare trustees expect Part B costs to grow steadily

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Tuesday, April 23, 2019

WASHINGTON – Projected costs for the Supplementary Medical Insurance (SMI) Trust Fund, which funds Medicare Part B and D, are expected to grow steadily from 2.1% of GDP in 2018 to about 3.7% GDP in 2038, according to the 2019 Medicare Trustees Report.

The reason: an aging population and rising healthcare costs.

Despite the growth, the SMI Trust Fund is expected to be adequately financed in all years because premium income and general revenue income are reset annually to cover expected costs, the trustees say.

The Hospital Insurance (HI) Trust Fund, which funds Medicare Part A, has a much bleaker outlook, the trustees say: It will only be able to pay full benefits until 2026.

For the 75-year projection period, the HI actuarial deficit has increased to 0.91% of taxable payroll from 0.82% in last year’s report, according to the report.

The reason: a number of factors, most notably lower assumed productivity growth, as well as effects from slower projected growth in the utilization of skilled nursing facility services, higher costs and lower income in 2018 than expected, lower real discount rates and a shift in valuation period.