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
Ten Options to Secure the Medicare Trust Fund
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.
We catalogue ten potential options to improve the solvency of the Medicare 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
Trust Fund Solvency Could Stabilize the Debt
Restoring solvency to the major trust funds could stabilize debt as a share of the economy, albeit at a very high level. We estimate that when dynamic...
Health Care Proposals in the President’s Fiscal Year 2025 Budget
For more about these proposals, listen to Josh Gordon , CRFB’s Director of Health Policy, on the podcast: Facing the Future . The President's Fiscal...
Employer Plans in Medicare Advantage: A Flaw in the Quality Bonus System
Employer Group Waiver Plans (EGWPs) are a popular option for unions and employers to provide former workers with retiree health insurance in place of...
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.