Falling on deaf ears

So long as Americans believe someone else should pay to fill the gap, Congress won’t act. So long as Congress and the Executive Branch of our Government keep lying to the American people that they “paid for” their benefits, especially those who have commenced (or will commence prior to trust fund exhaustion), Congress won’t act.

It is important to note that without Congressional action, there is no cut in benefits. That is, the benefits that cannot be paid due to lack of funding become a damn IOU – further increasing the burden on those too young to vote and generations yet unborn.

Social Security: If a trust fund became depleted and current receipts were insufficient to cover current expenditures, there would be a conflict between two federal laws. Under the Social Security Act, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending in excess of available funds, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time.

It is unclear what specific actions SSA would take if a trust fund were insolvent. After depletion, the trust funds would continue to receive tax revenues, from which a majority of scheduled benefits could be paid. One option would be to pay full benefits on a delayed schedule; another would be to make timely but reduced payments. Social Security beneficiaries would remain legally entitled to full, timely benefits and could take legal action to claim the balance of their benefits.

Medicare: Keep in mind that Medicare Part B and Part D are funded with general tax revenues. So those benefits will continue to be paid so long as the federal government can run deficits.

The practical function of the HI trust fund is to permit the continued payment of bills in the event of a temporary financial strain (e.g., lower income or higher costs than expected) without requiring legislative action. As long as the HI trust fund has a balance (i.e., securities are credited to the fund), the Treasury Department is authorized to make payments for Medicare Part A services. If the HI trust fund is not able to pay all current expenses out of current income and accumulated trust fund assets, the HI trust fund is considered to be insolvent. To date, the HI trust fund has never become insolvent.

There are no provisions in the Social Security Act that govern what would happen if insolvency were to occur. For example, the program has no statutory authority to use general revenues (income and other taxation) to fund Part A services in the event of insolvency. While there will no longer be sufficient funds to fully cover Part A expenditures, the trust fund would continue to receive tax and other income, those funds would cover approximately 91% of Part A expenses.

The Medicare trustees have suggested that in the event of HI trust fund insolvency, there could initially be delays in payments to plans and providers and, following soon after, beneficiary access to Part A services could “rapidly be curtailed.” The Social Security Act does not specify what would happen if the HI trust fund were to become
insolvent – what actions CMS might take. CMS could choose to pay full benefits on a delayed schedule or, alternatively, to make timely but reduced payments.

However, assuming that the response is simply to reduce Medicare reimbursements to say Medicaid levels, that would place the financial strain on hospitals and other Part A providers (dialysis, etc.) In that event, expect some providers to opt out of Medicare (as most have already opted out of Medicaid) and we will soon have a new version of the wild, wild west.

One can only guess how this might affect funding of the ever-increasingly favored Medicare Advantage options. And, if you were a corporate benefits weenie, and your firm offered retiree medical coverage, what would you do with respect to those 70, 80, 90 year olds covered in your plan?

Given your retiree medical plan’s integration with Medicare and all the rules Medicare requires, what could you do? More importantly, given that we are talking about HI exhaustion in 2026 or 2028, what can you do (what should you be doing) today!?

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