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Medicare’s Financial Health Worsens
A new report expects the funds for Part A hospital insurance are at risk after 2033
AARP (The Voorhes, Getty Images)
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.
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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.
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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.
Medicare costs are expected to nearly double over that time, from $1 trillion in 2023 to $1.9 trillion in 2032, the commission projected. But only 2.5 workers per beneficiary will fund the program in 2029, down from 2.8 in 2023, the commission reported.
The increasing popularity of Medicare Advantage (MA) is also a financial concern. More than 51 percent of eligible Medicare beneficiaries are enrolled in private MA plans.
This year, MA coverage will cost 20 percent more per enrollee than original Medicare, the commission reported. The Centers for Medicare & Medicaid Services has increased payments to MA plans by an average of 5 percent next year.
The Hospital Insurance fund’s worsening finances “reflected an upward revision in expected expenditures in the near term,” the trustees explained. “Realized expenditures in 2024 were higher than the trustees had anticipated last year — which increased the starting, or base, level of spending for 2024 and the projected level of spending for all future years.”
Trustees also “increased assumed growth in inpatient and hospice services over the early years of the projection period this year,” they wrote.
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