COVID-19 has, without question and for good reason, been front and center on the minds of healthcare professionals the world over. But when it comes to the issue of Medicare, the pandemic is adding an extra wrinkle and hastening a necessary conversation about the financial reality and imminent fiscal toll of this health crisis.
Deficits are intensifying across all areas of government in the United States as a result of the pandemic and there is a great degree to which there’s little that can be done. Balancing the economy and public wellbeing is always a delicate tightrope to walk under the best of circumstances, but there’s a fiscal bridge to cross and it’s approaching fast.
Deficiets Will Expand
According to the nonpartisan budget experts in the Committee for a Responsible Federal Budget, the long-term fiscal outlook is worse than anyone imagined.
According to June 2020 reports, deficits will expand by $5.7 trillion from 2020 to 2030. As a share of the economy, debt will grow from 79 percent of the gross domestic product to 101 percent of GDP by the conclusion of 2020. By 2030, that number’s expected to sit at around 118 percent.
This has put many programs in peril, from the Highway Trust Fund to the Medicare Hospital Insurance trust fund. The Committee projects that, under current fiscal paths, even the collective Social Security trust funds could be exhausted by 2031.
One solution is supposed to be short-term borrowing, but even that means that debt will exceed the economy this year – a decade sooner than projections have indicated.
To put this in a Medicare context, fewer payroll taxes have been collected due to people being out of work over the course of the pandemic.
And consider that the number of Medicare beneficiaries are increasing, with Congress having to take from reserves to pay for COVID-19 relief efforts. That has already had a snowball effect, with Medicare trustees reporting in April that the Part A Trust Fund would run out of cash starting in 2026.
The wrinkle in that projection? It didn’t include the COVID-19 relief spending in the final analysis.
Other projections, like that of the Leonard David Institute of Health Economics, have put Medicare Part A Trust Fund insolvency starting as early as 2022 or 2023 – and that might be generous. With Medicare unable to pay its own bills and with weakened payroll taxes to supply revenue, the program is strapped for cash.
Now, the plan is to pay the trust fund back from the costs correlated to the CARES Act. This Act helped hospitals weather the storm of COVID-19 expenditures and took at least $60 billion from the trust fund, not the general treasury.
So what happens if the trust fund becomes insolvent?
The short – and disconcerting – answer is that nobody really knows. This hasn’t happened before. Not only that, there are no provisions in the Social Security Act that cover the subject because there’s been no subject to cover in the past. So essentially, it’s another case of being in uncharted waters – just like the pandemic itself.
If the trust fund becomes insolvent, cash flow continues but Medicare patients receive a significant decrease in the support they would ordinarily find themselves entitled to. Hospitals won’t receive as much money from Medicare, particularly if the program has to go other routes to spread financing out over time as it waits for more money to flow in.
Right now, the pandemic appears to be providing an idyllic diversion of sorts. According to many budget experts, the medical establishment isn’t seeing this coming because it’s too busy fighting COVID-19.
But the writing is on the wall when it comes to Medicare money and this pandemic is pushing things closer to the brink sooner than many considered. The next steps will be essential to maintain the reliability of the program and to ensure senior citizens continue to receive the care they deserve across the United States.
Solutions aren’t easy and money doesn’t grow on trees. And the lack of preparation and planning for the ins and outs of the COVID-19 crisis could deal Medicare a serious blow.