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Medicare Hospital Insurance Trust Fund is threatened by the Supreme Court challenge to Obamacare | Column
This could more rapidly drive the Medicare Hospital Insurance Trust Fund to insolvency, writes a Harvard health expert.
The Supreme Court will rule on the Affordable Care Act.
The Supreme Court will rule on the Affordable Care Act.
Published Oct. 30, 2020

Thanks to President Donald Trump’s attempt to strike down the Affordable Care Act in the Supreme Court, we find ourselves on the precipice of one of the greatest economic and human blunders our politics has ever contrived. It is a completely avoidable lose-lose situation.

Right now, President Trump and a set of zealous state Attorneys General are energetically attacking the Affordable Care Act in the Supreme Court, setting the stage to take away health insurance from about 25 million people during a pandemic, withdraw protections against discrimination in health insurance, protections for people with pre-existing conditions, and health care protections for those who keep their insurance.

Richard Frank
Richard Frank [ Provided ]

It turns out that this lawsuit does not only threaten private health insurance, but it more rapidly drives the Medicare Hospital Insurance Trust Fund to insolvency. That means future generations would not be able to pay the bills for the hospital and nursing home care of our older adult neighbors. Allowing Medicare’s Hospital Insurance Trust Fund to become insolvent would amount to a cruel welching on a promise made long ago.

The Affordable Care Act is more than 10 years old and touches every part of our health care system. In addition to expanding health insurance coverage, it made important changes to how we pay for health care. Specifically, it helped move the system toward stronger financial footing.

In 2010 the Medicare Trustees projected that the passage of the Affordable Care Act added 12 years to the life of the Trust Fund, resulting from putting in place savings to shore up the Medicare program. Those provisions included:

* Promoting reduced hospital readmissions so that we better serve patients and save money,

* Reducing overpayment for home health services,

* Paying private plans in the Medicare program to make them realize their promise to improve efficiency in care and deliver savings to taxpayers,

* Lowering drug costs in long-term care hospitals,

* Changing the inflation updates to hospitals.

All of these changes together extended the life of the Medicare program by strengthening the financial status of Medicare’s Trust Fund.

In April, a decade after the Affordable Care Act’s passage, the Trustees of the Medicare program issued a warning that the Trust Fund was facing insolvency in 2026, even before COVID-19 hit. Last month, the Congressional Budget Office projected that, because of COVID-19, the insolvency date had moved to 2024. Anyone who has worked on a federal budget will tell you that four years is tomorrow in government time.

Most of the deterioration of the financial status of the Trust Fund is explained by declines in the payroll tax revenues that support the Trust Fund, from the spike in unemployment and people shifting to part-time work. Unfortunately, these revenue pressures will continue.

The acceleration toward insolvency is paired with high levels of uncertainty with regard to the ability to control the morbidity and mortality caused by COVID-19, the timing, degree and speed of any economic recovery, and the changes in health policy needed to contend with disruptions associated with the pandemic. Unemployment is expected to recover slowly, averaging 6.1 percent in the next decade.

Invalidating the Affordable Care Act would make all of this worse. It would bring Medicare’s insolvency date still closer, effectively driving the Medicare program over the financial cliff. Throwing out the work of years to bring financial stability to Medicare would increase claims made against the Trust Fund by about $300 billion over 10 years.

Washing away all those savings would dramatically increase the Medicare Trust Fund deficit. Today’s projections, with the Affordable Care Act in place, indicate that in the year following insolvency, the Medicare program would only have enough income to pay for 83 percent of its hospital and nursing home bills, and that would fall to about 80 percent within five years.

If the Affordable Care Act disappears, the payment rate would be higher and so an even smaller portion of the money owed could be paid out. To put that in context, the average cost of a Medicare hospitalization in 2017 was $14,700. That means that paying the average hospital bill would require coming up with an extra $2,500 either out of pocket or from other sources.

So, who wins from the eliminating the Affordable Care Act? Taxpayers lose, they would end up paying more for less; more people will be uninsured; Medicare recipients would get hit with new costs; hospitals would have fewer insured patients and would see fewer payments from Medicare; and the country would walk away from a commitment made in 1965 to pay for the health care of our older adults.

There is an alternative. Former Vice President Joe Biden’s plan for health care would strengthen Medicare, allow Medicare to negotiate lower drug prices, and continue to expand coverage and pay providers and insurers appropriately by further strengthening the Affordable Care Act ensuring the program is still there for the generations of Americans to come.

We should remind ourselves of the ongoing challenge to a nation that Lyndon Johnson believed Medicare would address when he signed it into law. He said: “…we have proved, once again, that the vitality of our democracy can shape the oldest of our values to the needs and obligations of today.” Let’s make sure our timeless values meet today’s needs and obligations, and let’s elect leaders who will strengthen Medicare rather than tear it down.

Richard G. Frank is the Margaret T. Morris Professor of Health Economics in the Department of Health Care Policy at Harvard Medical School. He wrote this exclusively for the Tampa Bay Times.