Covid-19 is accelerating the Medicare trust fund’s dive toward insolvency

The Covid-19 pandemic has claimed another victim: Medicare’s trust fund. The Congressional Budget Office released a report Wednesday projecting that Medicare’s federal Hospital Insurance Trust Fund, which helps pay for Medicare beneficiaries’ hospital bills, will be insolvent by fiscal year 2024. That means there won’t be enough money in the trust fund to fully pay hospitals, doctors, and nursing homes for the care they provide to Medicare beneficiaries.

These projections describe a crisis for Medicare, a program that, together with Social Security, form the bedrock of our country’s retirement safety net and assure that millions of older adults can get the health care they need.

Concerns about the Medicare trust fund are not new. Insolvency projections for the trust fund have varied over the years, but the outlook has not been this dire since 1971. Before the Covid-19 pandemic, Medicare trustees had projected that the trust fund would become insolvent in 2026. That time frame has accelerated as payroll tax revenue flowing into the trust fund in the next few years is anticipated to be far lower due to the economic recession resulting from the pandemic.

At the same time, health care costs and money flowing out of the trust fund are similar to pre-pandemic levels. In addition, per-enrollee payments, which pay for each person covered regardless of how much health care that person uses, and which play a growing role in Medicare, blunt any reduction in health care spending.

Notably, neither candidate for president has mentioned the Medicare trust fund, much less how they would solidify Medicare’s future. Perhaps that is because while Medicare is an important issue for voters, there are a limited number of options for addressing the trust fund’s solvency, none of which are easy choices during normal times, much less during a recession with an ongoing pandemic.

Regardless of who is elected president, come January his administration and Congress will need to develop a plan to address Medicare’s solvency, and decide who will pay to extend it.

The choices for doing so fall into a few broad categories:

• require Medicare beneficiaries or taxpayers to pay more to support the program
• pay health care providers less for the care they provide to beneficiaries
• or increase how much the federal government spends on Medicare.

All of these options have significant drawbacks. With unemployment at its highest level since the Great Depression, Americans likely will have little appetite for new or higher taxes or paying more for Medicare services. Providers have suffered financially during the pandemic and paying them less is also likely to be unpopular. And increasing government spending on Medicare means either increasing the country’s debt or making cuts to other federally funded programs.

There are possible workarounds for these challenges. Taxes could be raised on wealthier Americans, though that might be politically challenging and insufficient on its own to achieve enough savings. Cuts to provider payments could be targeted to those on firmer financial footing or take place in the form of initiatives that improve the efficiency of care.

Lawmakers will likely need a multipronged approach that includes a combination of options to generate enough savings and meaningfully extend the solvency of the trust fund. The sooner lawmakers can lay a road map toward Medicare solvency, the more it will help beneficiaries, their families, and health care providers plan for the future.

Gretchen Jacobson is vice president for Medicare at the Commonwealth Fund.