There are countless rumors about how we’re going to run out of Social Security funds in the near future. What if we told you all of those were wrong?
That’s right. The Medicare Trust Fund is the sole runner of these funds and others. Keep reading to hear everything you need to know about the Medicare Trust Fund and why it’s important.
What Is Medicare?
To understand the trust funds, you have to understand exactly what Medicare is. Surprisingly, a lot of people don’t know what this governmental service is and what its purpose was upon creation.
Medicare is a kind of federal health insurance in the United States that is meant for those who are 65 and older. However, some young people with certain disabilities can also apply for the benefits.
Medicare has covered over 58 million people at $705.9 billion. There are three parts to Medicare: A, B, and D.
Medicare Part A covers hospital expenses, like inpatient stays and hospice care. Medicare Part B covers medical expenses, like doctors’ visits and medical supplies. Medicare Part D covers prescription drugs which include any medications you may pick up at your pharmacy.
What Is the Medicare Trust Fund?
Medicare takes up a big chunk of the government’s funding. Chunks of money go towards paying for Medicare.
Two funds cover Medicare: The Hospital Insurance Trust Fund and The Supplementary Medical Insurance Trust Fund. Let’s talk about funding a trust.
The Hospital Insurance Trust Fund makes up the majority of the funding for Medicare. This money comes from payroll taxes, interest on the money itself, and taxes on the benefits.
The Supplementary Medical Insurance Trust Fund covers Medicare Parts B and D. This money comes from monthly premiums, state payments, taxes on benefits, and interest on trusts.
Should We Be Worried?
Many people were up in arms when the financial stability of the Medicare Trust Fund became a problem. It was estimated that we would run out of funding by 2026.
However, the financial projection of the Medicare program is not as simple as that. There is much more that goes into the projection of future finances and the stability of the future of the program.
Let’s discuss some of the major issues surrounding the Medicare Trust Fund and how exactly you should interpreting their financial struggles.
Medicare Is Taking in Enough Money
Because of all of the income streams that we covered before, Medicare is still bringing in enough money to cover its overall costs. Although Medicare did spend billions of dollars caring for millions of people, it’s revenue still remained more than its loss.
This basically means that Medicare is able to sustain itself even with the billions of dollars going out towards all of its patients.
Because Medicare is taking in so much money, it will not completely wither down by 2026. However, there are some things to look out for as we go forward.
Medicare Part a May Be at Risk
As we discussed, The Hospital Insurance Trust Fund funds Medicare Part A. The Hospital Insurance Trust Fund is the particular fund that is expected to lose its money by the year 2026.
However, its money loss has been projected before. This is not the first time that The Hosptial Insurance Trust Fund has been projected to become insolvent.
Medicare will still be able to cover some of the financial loss if the Hospital Insurance Trust Fund does become insolvent. This will decrease over time, but we will still be able to cover the majority of Medicare costs.
Medicare Part B Will Remain the Same – Mostly
Keep in mind that Medicare Part B is funded by a different trust fund, The Supplementary Medical Insurance Trust Fund. This fund has not been projected to become insolvent.
The Supplementary Medical Insurance Trust Fund has been projected to be financially stable beyond the next decade. There is no financial worry surrounding Parts B and D of Medicare because of the stability with this trust fund.
This financial stability is due in part because of the fact that this trust fund is funded by monthly premiums and government spending. However, everything is not perfect with the Supplementary Medical Insurance Trust Fund.
There is a projected increase in medical costs over time. This increase will – in turn – affect the Medicare Part B participants and cause noticeable increases in their premium costs.
Because of this increase, the government itself will also see an increase in the money needed to fund Medicare Part B through The Supplementary Medical Insurance Trust Fund. This increase in the required amount needed is what is also lending to the worry that people have surrounding the Medicare Trust Funds.
Medicare Part D Is in the Same Boat
Since Medicare Part B and Medicare Part D are both funded by The Supplementary Medical Insurance Trust Fund, they will both be affected in a similar fashion. Like Medicare Part B, Medicare Part D is funded by monthly premiums and government expenditures.
As with Medicare Part B, there will be increases in medical expenses over time. This increase in expenses will lead to the need for an increase in spending by Medicare trust funds.
The financial issues will lead to an increase in the premiums to continue to rise over time, just as they are projected to with Medicare Part B.
How the Affordable Care Act Affects This
Because of the increase that was found in both Medicare Part B and Medicare Part D, a solution had to be found. The trustees of the Medicare trust funds have found that the Affordable Care Act along with the Medicare Access and CHIP Reauthorization Act may cause the medical expense growth rates to slow down.
However, there has been a push to revoke the Affordable Care Act in the recent administration. Revoking this could escalate the issue that we’re facing with rising medical costs.
What You Can Do
If you’re worried about Medicare its the future of its trust funds, the best thing you can do it try to save up for your own retirement. No matter how old you are, you should be setting aside money for your future.
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