The Countdown
Our major federal trust funds are approaching insolvency.
What is the Medicare Hospital Insurance Trust Fund?
Medicare, a federal health insurance program, provides coverage primarily to people aged 65 and older. Its Hospital Insurance trust fund finances just Medicare Part A, which covers inpatient care in hospitals. Its revenue comes primarily from a 2.9% payroll tax, paid equally by workers and employers.
Medicare Part B, which covers outpatient care, and Medicare Part D, which covers prescription drugs, are financed through a different federal trust fund funded mainly by beneficiary premiums and general revenue from the federal government. Though their costs are high and rising, they don’t face the same type of solvency challenges.
Why is it in trouble?
Health care costs are rising, and the population is aging. This means more people are becoming eligible for Medicare, their benefits are becoming more costly, and there are less people in the workforce paying the taxes that support those benefits.
What can we do to ensure Medicare trust fund solvency?
We need to reduce health care costs, change benefit design, increase payroll tax revenue and/or identify new sources of revenue for the trust fund.
Get Into the Weeds
CBO’s Medicare Savings Options
As health care costs rise and the population continues to age, the gap between Medicare costs and revenue collections is continuing to grow. Without action, Medicare payments from the trust fund would be significantly reduced or delayed, leading to a potential loss of access to care for enrollees.
Using CBO's most recent budget options for Medicare, we identify potential savings and their effects on the HI trust fund. These options are meant to serve as illustrative examples and, in most cases, represent relatively ambitious versions of policies that could be scaled up or down in a variety of ways.
A Deeper Dive
WATCH - Erskine Bowles: We Can Save Social Security and Medicare
Erskine Bowles, former Co-Chair of the 2010 National Commission on Fiscal Responsibility and Reform and current Committee for a Responsible Federal...
Event Recap: Saving the Trust Funds
On October 22, the Committee for a Responsible Federal Budget hosted Saving the Trust Funds: New Solutions for Social Security and Medicare. The event...
An Employer Compensation Tax for Social Security and Medicare
The Social Security retirement and Medicare Hospital Insurance (HI) trust funds are approaching insolvency, with both trust funds expected to be...
Court Blocks CMS Ability to Recover Overpayments from Medicare Advantage
Overpayments in the Medicare Advantage (MA) program continue to be a significant problem for the federal government, and the problem may have just...
It's Time for Trust Fund Solutions
Some of the nation’s largest and most important programs are financed through government trust funds that collect dedicated revenues and then...
A Second Reconciliation Bill Should Reduce Deficits
As Congress considers the possibility of a second reconciliation bill, lawmakers should ensure it reduces deficits rather than adds to them as the...
What Can I do?
Reach Out to Congress
We need Congress to fix these tough issues before our seniors, our economy, and future generations are in jeopardy. Find your representative and share your concerns.