Medicare’s Hospital Insurance Trust Fund Could Be Exhausted in 7 Years
Due to rising healthcare costs and the aging of the population, spending under the Medicare program will soon outpace its revenues, resulting in substantial cash deficits, according to the June 2026 Trustees report. As a result, the Hospital Insurance (HI) Trust Fund, which finances Medicare Part A, will be depleted in seven years — the same as in last year’s report. At that point, payments to participating hospitals and other providers would be reduced.
Below are the key takeaways from the report.
1. The Hospital Insurance Trust Fund will be depleted by 2033, at which point payments to hospitals would be reduced by 11 percent.
The projected depletion date draws three months closer than last year’s projections, primarily due to higher assumed utilization rates of some services, upward revisions to Medicare Advantage per capita expenditures, and lower revenues as a result of the One Big Beautiful Bill Act. The trust fund had a balance of $256 billion at the beginning of 2026 and for all future years, costs are expected to outpace revenues; the trust fund will incur deficits until it is exhausted.
2. Rising healthcare costs and an aging population are driving Medicare costs.
As the nation’s population ages, enrollment in Medicare will continue to climb and add to program costs. Older Americans spend more on healthcare, on average, than younger Americans and are not subject to payroll taxes once they stop working. The combination of the long-term trend of rapid healthcare cost growth and population aging accelerates the gap between Medicare’s spending and dedicated revenues. As a result, HI spending will climb from 1.5 percent of GDP in 2026 to 2.0 percent in 2036; payroll tax revenues, meanwhile, will average approximately 1.6 percent of GDP over that same period.
3. The largest source of Medicare’s financing comes from the federal government’s general fund.
When looking at Medicare as a whole (including the Supplementary Medical Insurance program and provision of prescription drugs), nearly half of the program’s receipts come from the general fund rather than dedicated payroll taxes. Compared to 50 years ago, the general fund accounted for a fifth of the revenues; payroll taxes accounted for 68 percent of the trust fund’s revenues. Looking forward, Medicare’s general fund financing is projected to continue to grow and put increasing pressure on the rest of the federal budget.
Without reform, Medicare spending will continue to rise over the coming years — threatening the HI Trust Fund and placing immense pressure on the overall federal budget. Fortunately, there are many solutions available to put the program on sound financial footing. Policymakers could increase revenues dedicated to the program, reduce program expenditures, or some combination of both. Securing that trust fund would not only prevent payment cuts to beneficiaries but also help relieve pressure on the nation’s unsustainable fiscal outlook.
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