Sep 1, 2021 - Health

The pandemic hasn't helped or hurt Medicare's solvency

A doctor in a white coat and green mask tends to a COVID patient in a bed in a hospital hallway.
Medicare's hospital trust fund is projected to be depleted by 2026. Photo: Brandon Bell/Getty Images

Medicare won't be able to fully pay for patients' hospital bills by 2026, a similar forecast from last year, according to the latest report from Medicare's trustees.

The bottom line: The coronavirus pandemic both drastically lowered payroll taxes that fund Medicare and stymied care that Medicare pays for. But the virus "is not expected to have a large effect on the financial status of the trust funds after 2024," the trustees said.

The big picture: The pandemic has created a tug-and-pull situation in health care, and the Medicare trustees' report epitomizes it.

  • The surge in layoffs lowered payroll taxes, which fund Medicare, and the federal government had to shoulder expenses tied to COVID-19 hospitalizations, tests and vaccines for Medicare enrollees.
  • However, "spending for non-COVID care declined significantly," the trustees wrote.
  • Like the broader industry, deferral of care more than offset COVID-19 expenses. And it's why Medicare's solvency date for hospital bills didn't change.

What to watch: Medicare's private insurance option and a pricey new drug will factor heavily into the program's finances.

  • Medicare Advantage enrollment is projected to rise drastically faster than the trustees anticipated last year. That could suck a lot more money from the hospital trust fund since Medicare Advantage plans cost more than traditional Medicare.
  • All projections did not include Aduhelm, the controversial Alzheimer's drug that Medicare is still evaluating for coverage. With a list price of $56,000 per year on average, Aduhelm could blow up Medicare's financing structure.
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