Social Security and Medicare Trust Funds Are on Track to Run Out in Less Than a Decade. Here's What to Know
A report released on Wednesday from the Social Security and Medicare Boards of Trustees pushed up the programs' go-broke dates, meaning the point at which they would not have enough money to fully cover benefits.
The worsening projections are in part because of a new law impacting Social Security and increasing health care costs, according to the report.
Here's what to know about the approaching funding cliffs.
How long will Social Security stay solvent?
The go-broke date for Social Security's trust funds was pushed up to 2034, from last year's estimate of 2035.
The funds cover old age and disability recipients. The program covers more than 60 million people in the U.S.
What about Medicare?
Last year's report set the go-broke date for Medicare's hospital insurance trust fund as 2036. But the latest report pushed up that date to 2033.
Medicare is a federal health insurance program that offers coverage for people 65 and older, as well as people with certain disabilities. More than 68 million people in the U.S. are enrolled in the program.
The hospital insurance trust fund pays for Medicare Part A, which covers care provided in hospitals and skilled nursing facilities, as well as some in-home care. It also helps pay for hospice care.
Why have the go-broke dates moved up?
The report largely attributes the Social Security go-broke date being pushed up to a new law, the Social Security Fairness Act, which took effect in January. The law repealed the Windfall Elimination and Government Pension Offset provisions of the Social Security Act, which 'increased projected Social Security benefit levels for some workers' and affected the go-broke date for Social Security's trust funds, according to the report.
Last year's expenses for Medicare's hospital insurance trust fund were also greater than initially anticipated, according to the report, which contributed to the go-broke date for the program being pushed up.
What happens after the go-broke dates?
The funds hitting their go-broke dates doesn't mean that there won't be any funds to cover any benefits after that point. After 2034, Social Security would only have enough funds to cover 81% of benefits. After 2033, Medicare's hospital insurance trust fund would only be able to pay 89% of costs.
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Claudia Fegan, MD: I think that the advancement of concierge medicine, where physicians are entering into direct financial agreements with the patients they're seeing, as opposed to using Medicare as a payer, is a trend. However, the majority of physicians in this country today are in an employment arrangement as opposed to being in private practice, which is where the majority of us were, say, 40 years ago. I would say that those large groups, as well as hospitals, cannot survive without Medicare. The majority of people over the age of 65 use Medicare as their insurance. As you pointed out, the majority of Medicare recipients today are now in Medicare Advantage plans, which are private plans. But without Medicare, I don't think it's economically feasible for the majority of physicians to survive. There will always be some who are catering to a group of patients who have the financial wherewithal to afford their care. But that is not the majority of Americans in this country. And more importantly, I would say that the majority of hospitals and large outpatient facilities cannot survive without payments or reimbursements from Medicare. Shaping Care Brull: Dr Gruber, you've done a lot of research on insurance policy design, like the use of copayments and formularies and decreasing utilization of unnecessary care and specific services that patients receive. How has Medicare policy impacted the types of drugs, imaging, and treatments that physicians can prescribe or perform? Jonathan Gruber, PhD: That's a great question. Thanks for having me here. Medicare influences [coverage] a lot through the copayments that they charge. Remember, Medicare, at least 30 years ago, was not actually that great of insurance. Most employer plans had very low copayments and deductibles. Medicare actually had relatively high copayments and deductibles. Today, Medicare looks more like a typical employer-provided health insurance plan in imposing copayments and deductibles on people using services. There is mixed evidence on the implications of that. My general read is that when you impose a copayment or deductible, people use less of all services, both necessary and unnecessary. But there does not look to be enormous evidence that, at least at the level of current Medicare copayments, it significantly impacts their health to be using less of those services. But then there's the long run, which is when Medicare covers services; it changes the shape of innovation in the United States. If Medicare says, "We're covering this surgery," people are going to innovate and create surgeries covered by Medicare. Setting Prices Brull: Medicare has a huge impact on the long-run structure of what is provided by healthcare in the United States, and that's important to consider as well. As a follow-up for anyone on the panel: As technological innovation in medicine advances, how might the program manage patient access and costs? Fegan: I think it's important to use data to make these decisions, and as clinicians, we appreciate — for example — peer-reviewed articles which compare whether something is a useful or beneficial service or not. You know the slogan about when you have a hammer in your hand, everything looks like a nail? When there's a new innovation, there's an inclination to want to use it. But I think the most important way to make these decisions is to do studies where we look at whether there's a real benefit to the innovation. And when clinicians use studies and examine outcomes, they make better decisions than just what happens to be the most exciting or innovative approach. Gruber: I want to strongly endorse that comment.I think we are facing what I call sort of a tsunami of incredibly effective but incredibly expensive new treatments, from GLP-1s for weight loss to new cell and gene therapies. Society is going to have to face a choice of how much we're willing to pay for those. And the only way to make that choice is not to leave it to the free market, because the free market is broken in healthcare. I teach basic economics, and I teach the reasons why the free market might not work. As Kenneth Arrow wrote in 1963, every one of those reasons applies to healthcare. Healthcare is a broken market. The government needs to be involved in setting prices, but the only way it can do so is with evidence on what works and what doesn't. This is what the rest of the world does. Norman Ornstein, PhD: Those are hard questions to ask, and we need to really invest resources in asking them. Let me just add that we don't know what impact artificial intelligence (AI) is going to have on the practice of medicine, at least not entirely. Something like 25 years ago, I went to a series of conferences with healthcare providers and talked about how I expected that within a short period of time — just as we saw with automobiles where you could plug something in and get a complete readout of what the issues were with the car — it wouldn't be long before people would go to a nurse practitioner, put their finger into a little device attached to a computer, and get a readout. And that would make general practitioners almost obsolete, and they would go right to specialists if there were issues. Obviously, that hasn't happened, but AI could be a game changer in terms of both providing great opportunities where physicians might miss things because they're siloed but also where it will change the whole provider community. 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I know people are upset about prior authorization and other things, and I'm not saying it doesn't have negative effects on people's mental health and well-being, but the truth is, there are a number of nicely done papers now which show that people in Medicare Advantage plans aren't in immeasurably worse health as a result. So, I think care management can be productive. The problem is, and Norm is the expert on this, that we set up a program which was originally designed to save money and took on a life of its own. Remember: When we set up Medicare Advantage, it paid at first 95% and then 90% of what Medicare paid. It then went up to 132% of what Medicare paid. How can a program save money if it's paying 132% of the alternative? The answer is, because it became a goal that people should have managed care, not that Medicare should save money — and that's the problem. I think Medicare Advantage can be a proper part of a well-functioning system, but we have to fix the reimbursement so we're not overpaying the plans, and this is becoming the major money maker for all insurance companies in America. Who's Overseeing Utilization Management? Fegan: One of the problems with Medicare Advantage is that the insurance companies have learned to game the system and figured out how to get better reimbursement. The other problem with prior authorization is that the Kaiser Family Foundation published a study that showed Medicare Advantage averaged two prior authorizations per enrollee at a time period when traditional Medicare averaged only one prior authorization for every 100 enrollees. While prior authorizations may have an appropriate place, they're designed to decrease utilization and decrease particular services. Patients who have a prior authorization denied, less than 10% of them appeal that denial. But on the other hand, when the denials are appealed, over 80% of the denials are overturned. The prior authorizations use AI. I think what happens with the appeal is that it goes to a physician who thinks this was a reasonable study or care to provide and therefore they're overturned. So prior authorizations may work in terms of decreasing the amount of more expensive care and studies and medications, but it's not clear to me that they meet the standard of care that most physicians would like to give. Brull: You read my mind in terms of our next question. You have written about the practice of Medicare Advantage companies using AI to deny claims. I wonder if we could go into that a little bit more deeply. [Centers for Medicare & Medicaid Services] recently said it's going to experiment with AI for this same use, but for its traditional fee-for-service Medicare members, starting next year. I wonder if you could talk a little bit more about that. Fegan: Traditional Medicare uses prior authorization, but as I pointed out, much less often than Medicare Advantage. As a result, when traditional Medicare denies a prior authorization, it's not overturned on appeal the majority of the time. It would seem that it's been a more appropriate use of the prior authorization. Traditional Medicare continues to use prior authorizations, but in a more judicious manner. I have concerns about the large number of prior authorizations, because for certain populations, that prior authorization is difficult for patients to navigate. Sometimes patients are missing out on things that we would think to be appropriate care. I have concerns about AI. I think there's a place for it, but we have to be careful in terms of the data we put in to arm the AI. And there should always be a backup in which experts who have experience in that particular field can have a say if they disagree with what would be in an algorithm.
