New Report on Medicare Solvency Showcases Fairytale Accounting Xavier Becerra and Julie Su Are Known For

On May 6th, the 2024 Annual Report of the Boards of Trustees of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund was released. It’s a very long title for a report that simply tells us the financial state of Medicare and project the future financial solvency of the program. One claim of the report is Medicare solvency has been extended 5 more years than the 2023 projection, and won’t go broke until 2036. But as with all things involving the Biden Administration, that isn’t the entire story.

The 261-page report should be a purely factual document, but like everything in today’s day and age, it’s politically biased. One clue as to the leaning of this political bias is who is on the Board who submitted this report to the Speaker of the House and the President of the Senate: They are all Biden appointees. Chief among them is Health and Human Services Secretary Xavier Becerra, who has made no secret of his future political ambitions to run for Governor of California in 2026, and seems to be positioning himself for exactly that right now.

Also on the Board are Treasury Secretary Janet Yellen, who famously said inflation was a “small risk” back in 2021 ahead of the Biden Administration’s push to pass $1.9 trillion in spending (projections, which are an important part of this report, clearly aren’t her strong suit).

The Board also features the incompetent Acting Labor Secretary Julie Su, former Maryland Governor Martin O’ Malley, and longtime Democratic staffer-turned-policy-analyst Chiquita Brooks-LaSure. Of course, these people all have a strong interest in telling us fairy tales about Medicare's financial health. But Becerra especially has an interest in painting a rosy picture of Medicare - what better way to position yourself to win what could be a tough primary than trying to establish a reputation as a guy who addressed entitlement solvency and improved the picture for today's and future seniors?

The report relies on a lot of hijinks to deliver a conclusion that Medicare is magically more solvent this year than it was last year.

One thing that comes up in the positive future assumptions for Medicare’s future time and again in this report is the Inflation Reduction Act. The authors give the IRA credit for future savings on prescription drugs due to the price negotiation component of the bill.

The trouble is, 2026 is the first year marked for “maximum fair prices” and drugmakers plan to challenge the policy in court before it can be implemented. In addition, the drug price negotiations included in the IRA were so massively ratcheted back that it's hard to believe they will have this significant an effect. So, we don't know whether the anticipated savings from IRA provisions will even accrue. If they do, though, could they possibly save so much and be the basis for Medicare's solvency improving as much as the report claims? It seems unlikely.

The Board went to great lengths to give credit for potential and unknown savings to legislation their boss - Biden - views as one of his major achievements, despite the fact the legislation didn’t reduce inflation. While the IRA received praise throughout the report, what was notably missing was credit where it was due-- for Medicare Advantage.

Medicare Advantage has previously been shown to increase entitlement solvency by Avalere Consulting. Avalere found that Hospital Insurance Trust Fund would remain solvent until 2048 if FFS utilization levels were similar to Medicare Advantage utilization levels.

This is despite the fact that the Medicare Advantage program is caring for more complex patients than traditional Medicare fee-for-service (FFS). So Medicare Advantage saves money anyway. But it does so to an even greater degree than some might think because it takes beneficiaries with more complex cases out of FFS. This is important because one big thing that changed between the last assessment by this particular Board of Trustees and this most recent one is an increase in the number of eligible enrollees who choose Medicare Advantage over FFS. Per the Kaiser Family Foundation, the percentage of those eligible enrollees who used Medicare Advantage went up in just one year from 48 percent to 51 percent. Given that the raw number of Medicare-eligible Americans has pretty much continuously risen over time (exception for 2020 when COVID forced it down, likely due to deaths), it is infinitely more plausible that heightened use of Medicare Advantage, not a not-yet-even-implemented IRA drug price negotiation scheme, is responsible for Medicare being in better financial health.

Ironically, while the Biden administration - including would-be Governor Becerra - are reaping the benefits of a better solvency outlook for Medicare thanks to Medicare Advantage, the Biden Administration has consistently made cuts to the Medicare Advantage program. In fact, these cuts to Medicare Advantage were also a feature of the Obama Administration as a major part of the way Democrats financed Obamacare.

Will anyone call Becerra on this as he moves closer and closer to a run for Governor? Especially since according to the Kaiser Family Foundation, more than 50 percent of eligible seniors choose Medicare Advantage. You have to hope the answer is "yes," but since this is complicated stuff that runs counter to dominant progressive narratives, the answer may well be "no."

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