Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - Medicare Trustees Report Summary 📃

3. Compliance Chatter 📢 - CMS Updated Guidance - Grievance, Determination, & Appeals

4. Sponsor Snapshot 🚀 - brought to you by Telos Actuarial’s 2024 White Paper - The Future of Medicare Supplement

5. Data Visual of the week📊 - Sources of Medicare Revenues

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

Medicare Trustees Report Summary 📃

This week’s deep dive takes a look at the Annual Report from the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Medicare Boards of Trustees). 

First, 5 easy questions & answers about the annual report.

Second, a closer look at key findings from the 2024 report released in May. (Spoiler alert, things don’t look great…)

Let’s get started by running through the basics of the Medicare Boards of Trustees Report in 5 easy questions & answers:  WHO? – WHAT? – WHEN? – WHERE? – WHY?

WHO?

The Medicare Board of Trustees was created to oversee the financial operations of both the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds.

• Hospital Insurance (HI) = Medicare Part A

• Supplementary Medical Insurance (SMI) = Medicare Part B and Prescription Drug Coverage/Part D

The Board is intended to have 6 members: the Treasurer, Labor, Health & Human Services Secretaries, the Social Security Commissioner, and 2 public trustees (interestingly, the two public seats have been vacant since 2008). Additionally, the Administrator of the Centers for Medicare & Medicaid Services (CMS) is the Secretary of the Board. While the Board submits the final report to Congress, it is prepared by the Office of the Actuary within CMS.

WHAT?

The Trustees Report wouldn’t typically be considered light reading.  It’s a detailed and expansive report with substantial data on the past and projected financials for the HI and SMI trust funds.  The 2024 report was over 250 pages long with 19 supporting workbooks containing data tables and figures used in the report!

However, the report does include an ‘Overview’ section intended to be readable by the public and to provide a concise explanation of the analysis and projections within the report.  (Additional sections are more technical and explore the actuarial assumptions and modeling behind the analysis and projections within the report – not for the faint of heart or easily lulled to sleep.)

WHEN?

The Report is prepared annually and typically released in early May.

WHERE?

Current and prior reports can be found on the CMS website:

https://www.cms.gov/data-research/statistics-trends-and-reports/trustees-report-trust-funds/trustees-reports-current-and-prior

WHY? 

It’s simple really. 

In 2023, Medicare had over 66 million beneficiaries and expenditures totaling over $1 TRILLION. And as a savvy Medicare Markets Insight reader, you already know neither of those numbers is expected to decrease in the near future. 

So, it doesn’t take an actuary to know that someone – or many someones – should be paying close attention to the funds behind those expenditures. 

KEY FINDINGS FROM THE 2024 REPORT

The Medicare Board of Trustees Report splits analysis of the 2 trust funds, HI and SMI, since the money flowing into each fund is sourced differently.  

Let’s look at the HI (Medicare Part A) trust fund first, which is primarily funded through payroll taxes.  The Trustees present both short-term and long-term outlooks for the HI trust.

In some good news from the report, the short-term outlook for the HI fund showed improvement from last year’s report.  In 2023, the Trustees report concluded that the HI fund would be depleted by 2031 but this year’s report improved that projection – showing the fund will remain solvent until 2036.

What was behind the improved short-term outlook? In a nutshell –

• Changes to private health plan assumptions and payment policy

• Lower-than-estimated 2023 expenditures

• Higher-than-estimated 2023 payroll tax income [1]

Despite this short-term improvement for the HI trust, the long-term analysis from the Trustees continues to project a serious & concerning funding shortfall. The report suggests payroll tax increases anywhere from 12% to 40% (effective immediately!) would be necessary to reduce or eliminate this long-term funding deficit. Alternatively, immediate reductions in expenditures from 8% to 22% could also be effective in addressing the HI trust funding concerns.

Ideally, we might see a combination of these approaches. 

Realistically, both are difficult regulations to enact.

Switching over to the SMI (Medicare Parts B and D) fund –

The SMI trust fund is financed partially (around 25%) through beneficiary premiums with the remaining revenue from general federal taxes. Premiums and government contributions are reset each year to cover expenditures and this means the “SMI trust fund is expected to be adequately financed over the next 10 years and beyond.”[2] That feels like great news!

Unfortunately, the SMI picture isn’t entirely rosy. Increases in SMI funding costs translate directly to the beneficiary (through premiums) and the federal budget. The SMI costs are expected to increase at a faster rate than the projected annual GDP growth rate, straining both beneficiaries and the federal budget.

The report explains this projected strain at the individual beneficiary level –

“the average Part B plus Part D premium in 2024 would equal about 11 percent of the average Social Security benefit but would increase to an estimated 17 percent in 2098.”

So, while the funding is projected to remain adequate for the SMI trust, there are still significant concerns with funding strain and the impact to the Medicare program.

WHAT NOW?

While the Trustees Report conclusions are serious, they remain hopeful. In their words:

“The Board of Trustees believes that solutions can and must be found to ensure the financial integrity of HI in the short and long term and to reduce the rate of growth in Medicare costs through viable means. The sooner the solutions are enacted, the more flexible and gradual they can be.”

Taxpayers, Medicare beneficiaries, future beneficiaries, providers, insurers, legislators, and government officials – we all have significant interest in making sure the Medicare program remains solvent and successful for many years to come.  The Trustees Report is a critical tool to aid in understanding a very complicated issue.

Now that you know the  WHO? – WHAT? – WHEN? – WHERE? – WHY? behind the report, make sure to pencil in some time next May to review the 2025 analysis and projections.

[1] American Academy of Actuaries, Issue Brief: MEDICARE’S FINANCIAL CONDITION: BEYOND ACTUARIAL BALANCE

[2] 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds; The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insur­ance Trust Funds; May 2024.

DATA Visual of the week 📊

This week’s data visual hails from KFF.org 

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

• Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)

• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)