Medicare Trust Fund Still Faces Shortfall in 7 Years, 2026 Report Says

How a lack of reserves would affect hospitals, other health care providers, Medicare enrollees and others isn’t known.

“But the law does say that providers are entitled to be paid in full, says Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF. “It’s unlikely that Congress would allow the trust fund to run out of money without taking action first, but exactly how a scenario like that would play out is unclear.”

If Congress doesn’t act, federal statute doesn’t mandate how the Medicare trustees, the Centers for Medicare & Medicaid Services or the Department of Health and Human Services should proceed, Zach Gaumer, vice president of health policy at the Bipartisan Policy Center think tank in Washington, D.C., said in an email.

“Policymakers could choose to reduce payments uniformly across all providers, for example, an 11 percent reduction, or make more targeted reductions to certain providers, for example, 8 percent for one group of provider[s] and 13 percent for another group of providers,” he said. “Payment cuts of this magnitude would very likely reduce access to care for beneficiaries.”

That might mean some providers would opt not to see Medicare patients anymore, some might limit less profitable services and others might close, Gaumer said. Or Congress could change Medicare’s cost-sharing for enrollees or curb their ability to get some services.

For modest payment cuts, beneficiary access wouldn’t fall too much. “But hospitals will be in a lot of trouble,” says David M. Cutler, professor of applied economics at Harvard University. “The number of providers dependent on Medicare is extremely high.”

Why the trust fund income is a concern

Revenue from payroll taxes makes up the bulk of the money coming into the Part A trust fund. Other income comes from federal taxes on some Social Security benefits, a surcharge on Medicare enrollees whose income is above a certain amount and monthly payments from the small percentage of people who don’t qualify for premium-free Part A.

Interest earned on trust fund assets that have been carried over from previous years also adds money to its coffers. But as spending on health care increases, the amount of money that working adults pay into Medicare isn’t keeping up. When that happens, Medicare must dip into that carryover money to pay its bills, reducing future interest income.

The Medicare Payment Advisory Commission’s (MedPAC) March 2026 report to Congress on Medicare’s current and projected finances shines a light on the program’s long-term challenges.

By 2030, 2.5 people per Medicare beneficiary will be paying Medicare taxes, down from 2.8 in 2024 and 4.5 workers for each enrollee in 1967, MedPAC points out. The independent agency was established to advise Congress on Medicare.

Rise in Medicare spending more than doubles inflation

In addition to the Part A trust fund, other parts of Medicare are feeling financial pressure as well.

Total Medicare spending jumped nearly 8 percent in both 2024 and 2025, in part because of changes that shifted more costs for Part D prescription coverage from beneficiaries to the federal government, the trustees and MedPAC say. AARP was a major supporter of the 2022 Inflation Reduction Act, which revamped Part D coverage.

In contrast, the overall inflation rate for 2024 and 2025 was 2.9 percent and 2.7 percent, according to the Bureau of Labor Statistics.

In 2025, Medicare’s $1.2 trillion price tag accounted for more than 20 percent of national health care spending and 3.9 percent of gross domestic product, according to the trustees and MedPAC.

“By the mid-2030s, Medicare spending is projected to double — in nominal terms, not adjusted for inflation — and be equivalent to over 5 percent of GDP,” the commission said in its March report to Congress. The program’s rising costs reflect the enrollment of boomers, people born between 1946 and 1964, increasing volume and intensity of health services, and higher costs for Part B drugs delivered by clinicians.

Medicare also spends roughly 14 percent more for Medicare Advantage enrollees, a projected $76 billion in 2026, than if those beneficiaries were in original Medicare, MedPAC says. As of February, 51 percent, or 35.9 million, of Medicare’s 70.1 million beneficiaries were enrolled in the private plans from commercial insurers.

AARP fights to strengthen Medicare financing

The report delivers an annual wake-up call for lawmakers who must decide how to avert a collision of rising Medicare enrollment, increasing health care costs and fewer workers per beneficiary to help foot present and future bills. Since 2000, the 2021 report, released after the first year of the pandemic, showed a trust fund depletion date five years in the future, and that happened because payroll tax revenue fell as COVID-19 drove high health care costs, especially for older adults.

AARP policy calls for ensuring the Medicare trust fund’s long-term solvency and maintaining reliable financing as enrollment grows.

“Medicare financing should be broad-based, stable and progressive,” the AARP Policy Book says. “Policymakers should ensure state laws and regulations do not reduce or undermine consumer access, affordability and quality in the Medicare program.”

Another trust fund, Medicare’s Supplementary Medical Insurance Trust Fund that pays for Medicare Part B and Part D services, faces no shortfall. Its main funding sources, Part B and Part D premiums and U.S. Treasury contributions, are adjusted annually to cover costs for the upcoming year.