What is 'Hospital Insurance Trust Fund'

The hospital insurance (HI) trust fund is also known as part A of Medicare, the United States' health insurance program for people age 65 and older and certain disabled persons. It is financed through payroll taxes derived from current workers and employers as well as taxes on Social Security benefits. This trust fund is overseen by a board of trustees that report yearly to congress regarding its financial status. It has been projected to become insolvent a number of times throughout the years, due to legislative changes, and is currently projected to become insolvent in the year 2029.

BREAKING DOWN 'Hospital Insurance Trust Fund'

The hospital insurance (HI) trust fund is a fund managed by the federal government that pays for health care services for Medicare recipients, including stays in hospitals, hospices and skilled nursing facilities (SNF). Medicare is a government-funded health insurance program for those 65 and older, disabled people and people with a specific set of health conditions specified by the government. The other parts of Medicare, parts B, C and D, pay for other types of health care services, and are funded through supplemental medical insurance (SMI) products beneficiaries pay for and through private insurance beneficiaries pay for.

The HI trust fund is funded by revenue from payroll taxes and from taxes on Social Security benefits from all workers in the United States, not just from beneficiaries. The program is intended to be something all workers work to pay into and then receive benefits from when they reach retirement age or become disabled and unable to work anymore. 

Outlook for ‘Hospital Insurance Trust Fund’

Analysts are concerned that the U.S. economy will not continue to support the HI trust fund because of changes in population demographics. The poulation of the United States is aging, as the birth rate goes down and as people live longer. This means that the number of younger workers to be taxed to support the trust fund is decreasing as the number of beneficiaries of the program is increasing. The Tax Policy Center estimates that the number of Medicare benficiaries will increase from around 55 million in 2015 to 81 million in 2030, but the number of younger workers supporting each beneficiary will decrease in that same time from from 3.1 to 2.4. The simple truth is that the fund will run out.

The HI trust fund is not an actual fund, with money coming in or going out, but an accounting mechanism to keep track of government securities. If the fund has a positive balance, payments from the fund can be made. But if the fund runs dry, millions of beneficiaries will lose insurance coverage with no mechanism to regain it.

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