AARP Hearing Center
Medicare’s Financial Health Continues to Improve, but Trust Fund Still Needs Shoring Up
Trustees project solvency until 2036, five years later than last year’s estimate
The Voorhes
The Medicare trust fund that helps pay for inpatient hospital stays is in better shape than last year, a trend that started in 2022, according to officials who oversee Medicare’s finances.
The Part A Hospital Insurance fund will be able to pay all its bills until 2036, five years later than reported last year and eight years later than the 2022 estimate, the trustees said in their 2024 annual report, released May 6. In 2036, the trust fund still would be able to cover 89 percent of Medicare costs with incoming tax revenue.
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“While there was good news today in the trustees reports, older Americans need certainty that Medicare and Social Security will be protected,” AARP CEO Jo Ann Jenkins says. Social Security’s trust funds are expected to run short of money by 2035, a year later than this past year’s estimate.
Reasons for the better Medicare outlook
The Medicare report attributes the improvement to several factors:
- Higher payroll tax income because the number of covered workers and average wages are projected to be higher.
- Spending for inpatient hospital and home health agency services that were lower than previously expected.
- A change in how Medicare Advantage rates were set starting in 2024.
“Social Security is the largest source of retirement income for most retirees, and Medicare is the primary and only source of health care for most people age 65 and older,” Jenkins says. “Older Americans make up the nation’s largest voting bloc and will hold leaders in Washington accountable if they fail to protect these programs.”
The trustees say that the Supplementary Medical Insurance (SMI) trust fund, which includes Part B doctors’ services and outpatient care and Part D prescription drugs, will have enough money indefinitely because premiums and federal contributions are automatically adjusted each year to cover costs.
The trustees project that the monthly premium for Medicare Part B will increase to $185 in 2025, up from $174.70 in 2024 and $164.90 in 2023. The 2025 Part B premium will be finalized in the fall.
However, they acknowledge that the premium increases through the years have put added strain on beneficiaries.
“Although the financing is assured, the rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers,” the report says.
94 million Medicare enrollees expected in 2060
In 2023, Medicare covered 66.7 million people, including 59.1 million people 65 and older and 7.6 million disabled people. By January 2024, the latest information available, 67 million were enrolled in Medicare, according to the Centers for Medicare & Medicaid Services.
The number of Medicare beneficiaries has doubled in the past 35 years and is expected to go up 39 percent in the next 35 years and to almost 94 million in 2060, the trustees report says.
Even though the trust fund is projected to last longer than previously expected, the trustees still are calling on Congress to help improve its finances over the long term.
“Current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the report says. “Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers and taxpayers.”
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