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New Report Reveals That Medicare Part A Fund May Be Tapped Out By 2028, Triggering Calls for Congress to Address This Problem

Experts say it is time to change Medicare financing, even as large numbers of baby boomers continue to enroll in the program each year

Medicare’s fund for payment of inpatient hospital care is expected to be tapped out in 2028. That’s according to a new report from Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (2022 Medicare Trustees Report). That’s somewhat better than running out of money for inpatient care in 2026, which was what Medicare announced in last year’s Medicare Trustees Report.

Either way, if Medicare is allowed to run dry, millions of patients (most among the elderly) may be unable to receive critical care, including clinical laboratory testing and pathology.

“The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund’s reserves will become depleted,” the 2022 Medicare Trustees Report states, which draws its data from a US Treasury Department fact sheet.

Catastrophe in the Making

Kerry Weems, Executive Chairman at Value Based Healthcare Investors Alliance and former Administrator for the Centers for Medicare and Medicaid Services (CMS) said federal lawmakers are apparently waiting to deal with a “catastrophe” in 2028 instead of a “crisis” in 2026. Weems shared his views in an article he penned for 4Sight Health, a Chicago-based healthcare strategy company, titled, “Dead Seniors Save Congress from Tough Decisions.”

“The progressively worse imbalance of expenditures versus revenues will exhaust the trust funds in 2028,” Weems wrote, adding that one of two payment scenarios will likely happen:

  • Medicare may pay bills on a “discounted basis,” which means if expected revenues are 85% of expenditures, then Medicare would pay bills at 85% of the amount, or
  • Medicare may put bills aside until it has the money from tax dollars.

“And then (Medicare would) pay them on a first-in-first-out basis,” Weems wrote, adding, “At the time of insolvency, that current Administration would have to pick its poison.”

For hospital clinical laboratory leaders and pathologists who provide care to Medicare beneficiaries, neither approach would be satisfactory. And a solution for funding Medicare Part A beyond 2028 needs to be crafted to ensure hospitals are paid on a timely basis.

But what should it be?

James Capretta, Senior Fellow at the American Enterprise Institute
“Medicare’s two-part insurance and trust fund design may have made sense in the mid-1960s, but it no longer does. Modern coverage is not bifurcated in this way and imposing stricter financial control over facility spending than clinician and outpatient services can distort the policy-making process, and thus also patient care,” wrote James Capretta (above), Senior Fellow at the American Enterprise Institute, in his analysis of the 2022 Medicare trustees report, published in Health Affairs. If Medicare truly does run out of money, millions of elderly people may lose access to critical healthcare services, including clinical laboratory testing. (Photo copyright: American Enterprise Institute.)

Medicare Funding Scheme is ‘Flawed’

According to the Kaiser Family Foundation (KFF), the amount of money Medicare needs to cover the deficit between 2028 through 2031 (the period studied in the trustees’ projections), is estimated at $247.4 billion.

Medicare is supported by employers and employees, who each pay a 1.45% tax on earnings, KFF explained. Balancing the fund supporting Medicare Part A requires either an increase of .70% of taxable payroll or a 15% reduction in benefits, KFF estimated.

“Medicare will not cease to operate if assets are fully depleted, because revenue will continue flowing into the fund from payroll taxes and other sources,” KFF noted.

However, the current set-up of Medicare trust funds (one for Part A and another funded differently for Medicare Part B, which includes outpatient coverage such as medical laboratory tests), is “flawed” and needs updating to enable reform.

That’s according to analysis written by James Capretta, a Senior Fellow at the American Enterprise Institute and Member of the Advisory Board of the National Institute for Health Care Management in Washington, DC, published in Health Affairs. He added that by dividing its coverage, Medicare may not be addressing the big picture in patient care.

Baby Boomers, COVID Challenge Medicare

Furthermore, Medicare faces challenges brought on by an aging population and increasing enrollees.

Baby Boomers (born between 1946 and 1964) will qualify for Medicare by 2030 and potentially leave the workforce, depleting their payroll tax contributions to the program, KFF pointed out.

Also, Medicare reform needs to reflect the impact of the COVID-19 pandemic. An analysis of 114,000 COVID-19-associated deaths from May to August 2020 showed 78% of the people were age 65 and older, according to the federal Centers for Disease Control and Prevention (CDC).

“Medicare beneficiaries whose deaths were identified as related to COVID-19 had costs that were much higher than the average Medicare beneficiary prior to the onset of the pandemic,” the 2022 Medicare Trustees report noted.

“The surviving Medicare population had lower morbidity, on average, reducing costs by an estimated 1.5% in 2020 and 2.9% in 2021. This morbidity effect is expected to continue over the next few years but is assumed to decrease over time before ending in 2028.”

In his 4Sight Health article, Weems suggested that the Medicare reform deadline was bumped to 2028 from 2026 due to fewer people living and able to access Medicare in coming years.

“Let’s honor those seniors by using the time for real Medicare reform,” Weems wrote.

Hospital laboratory managers and pathologists will want to keep a watchful eye on Congress’ handling of the 2022 Medicare Trustees Report. Though it is unlikely the nation’s decision-makers will act on the report during an election year, pressure to develop a solution to meet the funding needs of Medicare Part A hospital care beyond 2028 will start to build in 2023.

Donna Marie Pocius

Related Information:

2022 Medicare Trustees Report

2021 Medicare Trustees Report

Fact Sheet: 2022 Social Security and Medicare Trustees Reports

Dead Seniors Save Congress from Tough Decisions

FAQs on Medicare Financing and Trust Fund Solvency

Medicare’s Supplementary Medical Insurance Fund: A Growing Burden on Taxpayers

Preparing Clinical Laboratories for Invasive Federal Enforcement of Fraud and Abuse Laws, Increased Scrutiny by Private Payers, New Education Audits, and More

Medical laboratory leaders need to take opportunities to stay abreast of government and payer activity, particularly as payer audits become tougher, say legal experts

Even compliant clinical laboratories and anatomic pathology groups are reporting tougher audits and closer scrutiny of the medical lab test claims they submit for payment. This is an unwelcome development at a time when falling lab test prices, narrowing networks, and more prior-authorization requirements are already making it tough for labs to get paid for the tests they perform.

Clinical laboratory leaders can expect continued scrutiny of their labs’ operations and financials as government and commercial payers move forward with invasive programs and policies designed to ferret out fraud and bad actors.

Federal officials are focusing their investigations on healthcare providers who mismanage or inappropriately use Medicare and Medicaid programs, while commercial payers are closely scrutinizing areas such as genetic testing prior authorization, say healthcare attorneys with Cleveland Ohio-based McDonald Hopkins, LLC.

“The government is looking at fraud, waste, and abuse, and all the different ways they come into play,” said Elizabeth Sullivan, Esq., a Member and Co-Chair of the firm’s Healthcare Practice Group, in an exclusive interview with Dark Daily. “We anticipate there will be more enforcement [of fraud and abuse laws] centered around different issues—anything that can be a false claim.”

Specifically, government officials will key in on violations of the Stark Law, EKRA (the Eliminating Kickback in Recovery Act of 2018), and other anti-kickback statutes and laws, Sullivan said.

“And clinical laboratories, by virtue of the type of services and service arrangements they offer, will continue to be a target,” she added.

Medical laboratory leaders also must prepare for aggressive tactics by insurance companies. “On the commercial side, payers are getting more aggressive and more willing to take things to ligation if they don’t get what they want and don’t see a settlement that satisfies their concerns over issues,” said Courtney Tito, Esq., also a Member with McDonald Hopkins, in the Dark Daily interview. 

Current Investigations Likely to Impact Clinical Laboratories

Sullivan and Tito advise clinical labs to be aware of the following issues being fast-tracked by government and private payers:

The TPE audits program, according to CMS, is focused on providers with high claim error rates or unusual billing practices. During a TPE, a Medicare administrative contractor (MAC) works with a provider to identify and correct errors.

“The TPE audits are real hot right now. We are seeing a lot of clients go through this,” Tito said.

Feds Crack Down on Genetic Testing Fraud Schemes

Genetic testing is another “hot button” issue for enforcement by government and private payers, Sullivan and Tito state.

In fact, the US Department of Justice (DOJ) and the US Department of Health and Human Services (HHS) in September announced charges against 35 people including nine physicians for allegedly participating in healthcare fraud schemes involving genetic cancer testing of seniors nationwide, states a DOJ news release.

CMS is taking action against testing companies and practitioners who submitted more than $1.7 billion in claims to Medicare, the statement added.

The scheme involved medical laboratories conducting the genetic tests, McDonald Hopkins noted in an Alert about the DOJ investigation. The alert described how the scam operated:

  • Scam recruiters approached Medicare beneficiaries at health fairs;
  • In exchange for a DNA sample (in the form of a cheek swab) and a copy of the victim’s driver’s license, the “representative” offered a free genetic test;
  • Representatives allegedly asked the seniors’ doctors to sign-off on test orders. If the seniors’ physicians refused, the scammers offered kickbacks to doctors already in their group;
  • Clinical laboratories that performed the tests were reimbursed from Medicare and, allegedly, shared the proceeds with the scammers.

“Although these opportunities may seem appealing as an additional revenue source for providers, it is always important to review the regulatory requirements as well as the potential anti-kickback statute and Stark implications for any new arrangement,” Sullivan and Tito wrote in the McDonald Hopkins Alert article. 

Criminal Behavior in CMS Programs

Effective Nov. 4, 2019, CMS issued a final rule intended to stop fraud before it happens by keeping “unscrupulous providers” out of the federal healthcare programs in the first place, states a CMS news release.

The rule (CMS-6058-FC), called “Program Integrity Enhancements to the Provider Enrollment Process,” has new revocation and denial authorities to stop waste, fraud, and abuse, the news release points out.

Reasons CMS can revoke or deny enrollment to providers, according to another McDonald Hopkins Alert, include:

  • Outstanding debt to CMS following overpayment to the provider;
  • Coming back into CMS programs with a new identity;
  • Billing for services from non-compliant locations;
  • Abusive ordering or certifying under Medicare Part A or Medicare Part B.

Additionally, EKRA establishes “criminal penalties for unlawful payments for referrals to recovery homes and clinical treatment facilities,” Dark Daily recently reported. However, as the e-briefing points out, it is unclear whether EKRA applies to clinical laboratories.

Nevertheless, Sullivan points out that, “Even without EKRA, the anti-kickback statute applies to any arrangement between individuals. And, it is good to have an attorney look at those arrangements. What your sales reps are doing in the field, how they are communicating, and their practices warrant oversight. EKRA just makes it all the more important.”

During an upcoming Dark Daily webinar, attorneys Elizabeth Sullivan (left) and Courtney Tito (right) of McDonald Hopkins, LLC, will advise clinical laboratory leaders and financial staff on how to prepare for future aggressive payer audits, rigid enforcement of fraud and abuse laws, and more. (Photos copyright: LinkedIn/Dark Daily.)

Clinical Laboratories Need Compliance Plan, Focus on Payers

With so many legal requirements and payer programs, Sullivan advises medical labs and pathology group practices to work with resources they trust and to have a compliance plan at the ready. “Have resources in place, including but not limited to a compliance officer, a committee, and someone who is spending time on these issues. Monitoring government enforcement and payer activity is the most critical,” she said.

To assist labs in remaining fully informed on these critical compliance topics, and the federal government’s latest legislation to combat fraud, Dark Daily is offering a webinar on November 20th at 1pm Eastern time. Sullivan and Tito will offer their insights and advice on how labs should prepare for CMS’ battle to reign in fraud and commercial payers’ increased scrutiny into prior authorizations.

Clinical laboratory leaders, compliance officers, and finance staff will benefit greatly from this crucial resource.

Register for “Bracing for Aggressive Payer Audits, Rigid Enforcement of Fraud and Abuse Laws, and More” at or by calling 512-264-7103.

—Donna Marie Pocius

Related Information:

Dark Daily Webinar: What Lab Leaders Need to Know About How to Prepare for 2020: Bracing for Aggressive Payer Audits, Rigid Enforcement of Fraud and Abuse Laws, and More

Federal Law Enforcement Action Involving Fraudulent Genetic Testing Results in Charges Against 35 Individuals Responsible for Over $2.1 Billion in Losses is One of the Largest Healthcare Fraud Schemes Ever Charged

OIG Focusing on Laboratories Involved in Genetic Testing Scams

CMS Announces New Enforcement Authorities Reduce Criminal Behavior in Medicare, Medicaid, and CHIP

CMS Aims to Combat Criminal Behavior Through Enrollment Process

Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?