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1 1 (January 2024)

handle is hein.amenin/aeiaeue0001 and id is 1 raw text is: Medicare's Trust Funds: Background and the Need for Reforrn James C. Capretta January Medicare's two trust Funds present a rn!sleadirig picture of the prograrn and its contribution to the kderal gorve'4'rrnent's riSing debt burden. Hos 9tol ansurance (HI) is prciected t be decpleted of reserves by 2031, while SI uppiernertary Medica! insurance (SMI) is perpetua>y solenl itn reality, the drawdown of I's *arlaces and escalating -Ml costs are both prblems. M!' eCp/ndIures exceed His cutam obscured by Luiited receipis iroi the Irea o s su en- eral fund, which transiate dfrectly into rnore borrowing. te 2003 vedicare vodenization ,Act exacerbated the prooem by tapping the genera und fiturther prescription drug coverage, That law aso created a new trigger to expedite legislation eIng the future burden on the enera f , bt presidents have mstay n gnored it, and Con-ress has been oassv. Ine/tably, Congress wil be forced to step in to prevent Hi insoivency, When it does, it also shoul change SMi to restrain unfinanced cost growth. Poiitical eaders will be reluctant to cap the transfers, so other options shuld be considered to create pressure fcr change In recent years, the trustees overseeing Medicare's financia stability haye issued repeated warnings of falling reseres in the progran's Hospital Insurance (HI) trust tund Their 2023 report projects the I trust Eind balanne W. fall to zero in 2031 (Medicare TPruist- ees 2023). At that point, revenue will not tully- cover HI expenses, and the re would be no balance from prcious surpluses to draw on. While current law is anbigiuous about what would then occur, most analysts expect that the government would be forced to reduce Medicare HI expenditures through across-the-board cuts (probably focused on payments to flospitals and other releva:nt service providers). Understandabhly, avoiding the HI trust und's ap- proaching insolvency is seen witin Congress as essen- tial. Millions of disabled and deriy Americnns depend on the program to provide access to needed services, so it is not really in option politic aly to ignore the irnpli- cations of inadequate progran funding. To that end, the Senate Budget Committee recently held a hear- ing focused on what might be done to ensure HI trust fund tncome and reserves can fully cover all claims well beyond the current exhaustion date (US Senate Com- mittee on the Budget 2023). While 1-.. insolvency cannot be ignored., it should not be policymakers' singular focus. Medicare has a AMERICAN ENTERPRISE INSTITUT E

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