Medicare Trust Fund Shows Little Change, Sustainability Must Be the Focus

On Tuesday, the Medicare Boards of Trustees released their mandatory annual report on the financial status of Medicare’s trust funds. Like last year’s findings, the trustees project that the Hospital Insurance (HI) trust fund would be partially depleted in 2033. Partial depletion means the income to the program would be sufficient to pay for 89% of Part A benefits.

How Medicare Is Funded

There are two different Medicare trust funds: the HI fund and the Supplemental Medical Insurance (SMI) fund.

The HI trust fund finances Medicare Part A, which covers inpatient hospital care, hospice, skilled nursing facilities, and home health services following a qualifying hospital stay. The fund gets its money primarily through the Medicare payroll tax, which means improved employment and wages benefit the HI trust fund.

Improved employment and wages benefit the Hospital Insurance trust fund.

The Supplemental Medical Insurance (SMI) trust fund covers Part B (outpatient care) and some of Part D (drug coverage). The SMI trust fund gets its financing through a combination of premiums and general revenue amounts that change each year to account for projected spending. This financing means the SMI fund does not rely on payroll taxes and is not as constrained in its funding.

Medicare Advantage (MA) gets funding from both the HI and SMI funds.

Higher Spending and Lower Income

The trustees project that Part A spending will grow nearly 1% per year in the coming decade as a result of higher costs for care. This spending, coupled with lower income as a result of HR 1, brings the projected partial depletion date closer.

“Solvency” Is Only Part of the Question

The HI trust fund can become insolvent if no action is taken, meaning the fund would be partially depleted and only able to cover most, not all, expenses. But insolvency is only part of the question.

Because insolvency and depletion only apply to the HI fund, this framing leaves out the SMI fund and Part B, the largest source of Medicare expenditures. Policymakers should tackle prominent drivers of Medicare spending, such as overpayments to Medicare Advantage plans, to avoid burdening Medicare, beneficiaries, and taxpayers with excess costs.

Insolvency Can Be Avoided

Congress can make changes to ensure depletion never occurs. At Medicare Rights, we urge policymakers to consider ways to maximize the program’s efficacy and sustainability in a responsible, measured way.

Medicare Rights urges policymakers to consider ways to maximize the program’s efficacy and sustainability in a responsible, measured way.

We also support continuing commonsense efforts to lower out-of-pocket spending for people with Medicare, to fill gaps in coverage, and to ease access to low-income assistance programs. Together, these changes can improve Medicare for current and future beneficiaries.

Read the 2026 Medicare trust fund report and Treasury Department commentary.