By: Julius W. Hobson, Jr.

2023 Social Security and Medicare Trustees Reports

The Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs each year. This document summarizes the findings of the 2023 reports. As in prior years, we found that the Social Security and Medicare programs both continue to face significant financing issues.

Based on our best estimates, this year’s reports show that:

• The Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2031, 3 years later than reported last year. At that point, that fund’s reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits.
• The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, 1 year earlier than reported last year. At that time, that fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits.
• The Disability Insurance (DI) Trust Fund is projected to be able to pay 100 percent of total scheduled benefits through at least 2097, the last year of this report’s projection period. By comparison, last year’s report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2096, the last year of that report’s projection period.
• If the OASI Trust Fund and the DI Trust Fund projections are added together, the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2034, 1 year earlier than reported last year. At that time, the projected fund’s reserves would become depleted, and continuing total fund income would be sufficient to pay 80 percent of scheduled benefits. (The two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program.)
• The Supplementary Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources -- premiums on enrolled beneficiaries and federal contributions from the Treasury -- are automatically adjusted each year to cover costs for the upcoming year. Although the financing is assured, the rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers.

Links to the Medicare Report & Social Security Report: 2023 Medicare Trustees Report (cms.gov), _tr.book (ssa.gov)

HHS Updates 2024 Medicare Advantage Program and Part D Payment Policies

On March 31, 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), released the Calendar Year (CY) 2024 Medicare Advantage (MA) and Part D Rate Announcement that finalized payment policies for these programs. The final policies in the Rate Announcement improve payment accuracy and ensure taxpayer dollars are well spent. CMS will phase-in certain updates, and on average, CMS anticipates a payment increase for MA plans of 3.32% from 2023 to 2024, which is approximately a $13.8 billion increase in MA payments for next year.

The Administration has also proposed policies to strengthen the MA managed care program that will hold health insurance companies to higher standards by:

• cracking down on abusive and confusing marketing schemes;
• addressing problematic prior authorization practices that prevent timely access to needed care;
• making it easier to access vital behavioral health care; and
• raising the bar on quality and driving toward more equitable care.

The Rate Announcement finalizes updates to MA payment growth rates and changes to the MA and Part D payment methodologies. These include technical and clinical updates to the MA risk adjustment model to keep it up to date and improve payment accuracy. Two such changes are the transition to the Internal Classification of Diseases (ICD)-10 system, which is the coding classification system used throughout the U.S health care system since 2015, and updated data ears.  Modernizing the Medicare Advantage risk adjustment model by aligning it with the ICD-10 system will ensure the payment models are using more up-to-date data – bringing Medicare Advantage payments in line with current health care practices and making them consistent with other federal health care programs. The finalized risk adjustment model also reflects revisions focused on conditions that are subject to more coding variation. As in past years, CMS is finalizing policies to address these inconsistencies in order to ensure the model more accurately predicts medical costs.

The changes in risk adjustment payment policies finalized as part of this Rate Announcement were developed in collaboration with expert clinicians to take into account how well different conditions predict costs. The policies finalized in this Rate Announcement will help make more accurate payments. This reduces incentives to cherry-pick healthy beneficiaries and discriminate against sicker patients. In addition, CMS will continue to pay more for someone who is dually eligible for Medicare and Medicaid than someone who is not when they have the same diagnoses.

View a fact sheet on the CY 2024 Medicare Advantage and Part D Rate Announcement.

The 2024 Rate Announcement can be viewed at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents and selecting "2024 Announcement."

COVID-19 Update

Federal health agencies plan to authorize a second omicron-specific COVID-19 booster vaccine for people 65 or older or immunocompromised, according to several officials familiar with the matter. The Food and Drug Administration is expected to announce the plan in the coming weeks, and the Centers for Disease Control and Prevention is expected to quickly endorse the decision, the officials said.

Medicare Drug Price Negotiation Update

Today, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), issued initial guidance detailing the requirements and parameters—including requests for public comment — on key elements of the new Medicare Drug Price Negotiation Program for 2026, the first year the negotiated prices will apply. Alongside other provisions in the new drug law, the Medicare Drug Price Negotiation Program will strengthen Medicare’s ability to serve people currently in Medicare and for generations to come.

View a fact sheet on the Medicare Drug Price Negotiation Program Initial Guidance.

Read the Medicare Drug Price Negotiation Program Initial Guidance.

Medicaid Update

On March 8, 2023, The Center for Medicaid and CHIP Services (CMCS) released the State Medicaid Director Letter (SMDL) Third Party Liability in Medicaid: State Compliance with Changes Required in Law and Court Rulings [Italics to indicate hyperlink language to the letter]. The SMDL provides guidance to state Medicaid agencies on two new third party liability (TPL) requirements reflected in the Consolidated Appropriations Act of 2022 (CAA, 2022) and in a recent U.S. Supreme Court ruling (Gallardo v. Marstiller). Read the letter for full details on the updated guidance.

Budget & Economic Update

2024 Sequestration

On March 13, 2023, the Office of Management and Budget (OMB) released its report to Congress concerning sequestration for FY 2024, as required by law.  Under the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), the reduction in Medicare expenditures would be 2 percent.  The expected Medicare expenditure would be $952.177 billion, making the reduction to be $19.044 billion.  Note the Medicare reductions come from providers and not beneficiaries.  In the past Congress has acted to postpone the sequestration.  However, there is no expectation at this time that such action could happen this year.

Interest Rates

Last month the Federal Reserve Board’s Federal Open Market Committee raised interest rates by another .25 basis points. The demise of Silicon Valley Bank and two other financial institutions probably kept the FOMC from raising rates by .50 basis points. Fed Chair Jerome Powell did not rule out further rate increases. The combination of increased interest rates. There is also an expectation that banking regulators will step up reviews of financial institutions as well as proposed additional regulations. This will likely result in a tightening of credit and a reduction in lending.

Debt Limit

Congress is in recess until April 17^th. Upon its return the focus will be on the budget and debt. House Republicans don’t seem likely to produce a budget but will continue to insist on the Biden Administration agreeing to negotiations. 

House Republicans are pursuing two tracks. The first is a bill, H.R. 187, the "Default Prevention Act" which would require the Treasury Department to prioritize payment of obligations using a five-tiered payment structure if total debt is at the statutory maximum. Treasury would be required to make prioritized payments as follows:

• Tier I would include payments for public debt, Social Security, and Medicare.
• Tier II would include payments for obligations of the Departments of Defense and Veterans Affairs.
• Tier III would include payments for obligations of any programs not in a designated tier.
• Tier IV would include payments for certain federal employee union activities, executive branch travel, and compensation of the President, Vice President and some political appointees.
• Tier V would include compensation to Members of Congress

With regard to Medicare, it’s not clear would payments means — beneficiaries, providers, etc. 

The second track is legislation which would provide for a temporary extension of the debt limit and inclusion of some budget program reductions.  However, there is no information publicly available at this time.