There are two waysthe Medicare Trust Fund can get into trouble: Either the moneyflowing in is too little, or the payments going out for care aretoo much. (Photo: Shutterstock)

Everyone involved even tangentially in health care today iscompletely consumed by the coronavirus pandemic, as they should be.But the pandemic is accelerating a problem that used to be frontand center in health circles: the impending insolvency ofMedicare.

With record numbers of Americans out of work, fewer payrolltaxes are rolling in to fund Medicare spending, the numbers ofbeneficiaries are rising, and Congress dipped into Medicare'sreserves to help fund the COVID-19 relief efforts this spring.

Related: Medicare posts $5.8 billion loss

"I think we have a real, impending health care crisis," said Dr.David Shulkin, who was undersecretary for health at the Departmentof Veterans Affairs under President Barack Obama for two years andled the VA for a year under Donald Trump.

In April, Medicare's trustees reported that the Part A Trust Fund, whichpays for hospital and other inpatient care, would start to run outof money in 2026. That is the same as the projection in 2019. Butthe trustees cautioned at the time that their projections did notinclude the impact of COVID-19 on the trust fund.

"Given the uncertainty associated with these impacts, theTrustees believe that it is not possible to adjust the estimatesaccurately at this time," said the report.

So Shulkin, now a senior fellow at the Leonard Davis Instituteof Health Economics at the University of Pennsylvania, did his own projections. Given even a conservative estimate ofhow many workers and businesses would not be contributing payrolltaxes that finance Part A spending, he said, the trust fund couldbecome insolvent as early as 2022 or 2023.

"I think this is something that needs more immediate attention,"he said.

Others who make projections agree the insolvency date is gettingcloser, maybe not as close as 2022.

The Committee for a Responsible Federal Budget, a nonpartisan groupof budget experts focused on fiscal policy, estimates that thepandemic will cause the Part A Trust Fund to be unable to pay allof its bills starting in late 2023 or early 2024. "But we're stillvery close," said Marc Goldwein, the group's senior vicepresident.

There are two ways the Trust Fund can get into trouble: Eitherthe money flowing in is too little, or the payments going out forcare are too much.

Most of those who watch Medicare finances agree that the largerproblem right now is how much money is being collected for theTrust Fund. That money largely comes from the 1.45% payroll taxpaid by employees and employers. With so many people out of workdue to pandemic-related shutdowns, cash flowing in has droppeddramatically.

It's far less clear what is happening on the spending side ofMedicare Part A. (Medicare Part B, which pays physicians and otheroutpatient costs, is funded by beneficiary premiums and general taxfunding, so it cannot technically become insolvent.)

While COVID-related hospital expenses for those on Medicare areexpected to be substantial, Medicare hasn't been reimbursing asmuch care of other sorts. In some cases, that's because hospitalsin COVID hot spots temporarily stopped doing elective procedureslike joint replacements. In other cases, patients with non-COVIDailments have been afraid to go to hospitals for fear of catchingthe virus.

Also, said Goldwein, health care use tends to fall inrecessions, even for Medicare, whose beneficiaries are largelyretired.

In the end, he said, "we basically threw our hands up and saidwe don't have the information" to estimate how health costs willaffect the Trust Fund's financing.

There is one other COVID-related policy that could hasten thedepletion of the Trust Fund. At least $60 billion of the fundingprovided as part of the CARES Act to help hospitals weather thepandemic came not from the general treasury, but from the TrustFund itself.

That money in "acceleratedand advance payments" is supposed to be paid back, via areduction in future payments. But there is a push in some quartersfor that funding to be forgiven, which would make the Trust Fund'shole even bigger.

It is not exactly clear what would happen if the Trust Fund wereto become insolvent because it has never happened before. As theCongressional Research Service pointed out, "Thereare no provisions in the Social Security Act that govern what wouldhappen if insolvency were to occur."

It is important to remember that the fund becoming insolvent isnot the same as being bankrupt. Insolvent means the Trust Fundwould still have money flowing in, but not enough to pay for allthe care Medicare patients will consume.

Most budget experts think that Medicare would reimbursehospitals and other Part A providers 100% of their claims until thefund truly runs out of money. Then it would pay claims only as moremoney flows in. Others think Medicare might reimburse only apercentage of those claims, but that might require congressionalaction.

Meanwhile, one would expect the hospital industry to be ringingthe alarm bells as potential insolvency approaches. But that's nothappening.

"They're more concerned with next month than with 2023 at thispoint," said Goldwein.

Chip Kahn, president and CEO of the Federation of AmericanHospitals, agreed. "I'm not going to worry about this right thisminute," he said. "At this point, my focus is completely onCOVID."

Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.

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