from web site
While Part A is funded mostly by payroll taxes, advantages for Part B physician and other outpatient services and Part D prescription drugs are funded by general revenues and premiums paid for out of separate accounts in the Supplementary Medical Insurance, or SMI, trust fund. The revenues for Medicare Parts B and D are identified each year to satisfy predicted costs obligations, suggesting that the SMI trust fund does not deal with a funding deficiency, in contrast to the HI trust fund.
What aspects affect the solvency of the HI trust fund? Research It Here of the HI trust fund is affected by a number of aspects. In addition to legislative and regulatory modifications that impact Part A spending and earnings, Part A trust fund solvency is impacted by the level of growth in the economy, which impacts Medicare's income from payroll tax contributions; by general health care spending trends; and by demographic trends, such as the increasing number of beneficiaries, especially between 2010 and 2030 when the child boom generation reaches Medicare eligibility age, and a declining ratio of workers per beneficiary making payroll tax contributions.
In September 2020, 6 months into the pandemic and in the midst of a considerable economic recession and a substantial decrease in employment causing a decrease in payroll tax income, CBO accelerated its projected insolvency date by one year, to 2024. This was primarily based on lower expected revenues over the forecast period and an increase in projected Part A spending in 2020, compared to CBO's January 2020 forecast.
The modification was due to an increase in the projected quantity of payroll tax revenue based upon an expectation of faster recovery from the pandemic financial recession than CBO anticipated in its September 2020 projection, in addition to lower real Part A spending in 2020 than CBO had projected in September 2020 and lower projected Part A costs in future years.
What is the longer term outlook for Medicare financing and trust fund solvency? Over the longer term, Medicare faces monetary pressures associated with greater health care expenses and an aging population. To sustain Medicare for the long run, policymakers might think about embracing wider changes to the program that might include both decreases in payments to providers and plans or decreases in advantages, and extra earnings, such as payroll tax increases or new sources of tax earnings.