Medicare’s Financial Health Worsens  

The Medicare trust fund that helps pay for inpatient hospital stays, known as Part A, won’t have enough money after 2033 to pay all of Medicare beneficiaries’ expected hospital bills — three years sooner than was projected last year — according to this year’s Medicare Board of Trustees report published June 18.

At that point, the Part A Hospital Insurance Trust Fund’s reserves “will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits,” the trustees said in a message to the public, published alongside the report.

Funding for the Supplementary Medical Insurance (SMI) Trust Fund — which finances Medicare Part B (covering outpatient services like doctors’ visits) and Part D (prescription drug coverage) — is determined annually and doesn’t face a shortfall. However, “rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers,” the trustees wrote.

While Congress has never allowed the Hospital Insurance Trust Fund to be completely depleted, the continued financial stability of Medicare and Social Security is a high priority for AARP’s members who “stand ready to hold politicians across party lines accountable to strengthen these programs for the long term,” said AARP CEO Myechia Minter-Jordan in a statement.

“Medicare is the primary source of health care for Americans age 65 and older and plays an essential role in negotiating lower prescription drug costs. It’s paramount that the program remains financially strong for current and future generations,” Minter-Jordan added.

Medicare is funded primarily through general revenue, payroll taxes paid by employers and workers, and beneficiary premiums. As of February 2025, Medicare covered 68.5 million people, about 90 percent of whom are age 65 and over.

But constraining Medicare costs is a growing concern for the federal government. Inflation, an enrollment surge of aging baby boomers and increased use of medical services will fuel 7 percent to 8 percent annual increases in Medicare spending over the next 10 years, the Medicare Payment Advisory Commission reported to Congress in March.