Key Medicare Fund Will Be Insolvent in Just Five Years

The health program won't be able to pay all of its bills starting in 2026, according to a new Trustees report. 


Five years.

That's how long until Medicare officially can't pay all of its bills, according to the latest report on the program's fiscal health. After that, without changes, the program will start to miss payments. Medicare is on track for a serious fiscal meltdown. 

First, the gory details: Starting in 2026, the program's Hospital Insurance (HI) Trust Fund, which covers a variety of inpatient hospital services, will be depleted, leaving the fund to operate on a cash-flow basis—and there won't be enough cash coming into the program to pay all of the bills. Instead, the program will be able to pay about 91 percent of its tab, Medicare's Trustees estimate. Without changes to the program's financing structure, that percentage will shrink, leaving Medicare able to cover a smaller and smaller share of the costs associated with the HI fund. 

Medicare already pays less than private insurance in many cases, and it's a major payer for most hospitals. A nearly 10 percent reduction in payments would prove financially devastating to some hospitals, especially those that serve poorer populations, many of which are already struggling to stay afloat. 

No doubt, this will result in some policymakers suggesting that Medicare should be restructured so that it can draw from general revenues, like the program's Supplemental Medicare Insurance (SMI) fund, which pays for outpatient care, physician services, and prescription drug benefits. As the Trustees report notes, the SMI fund is "adequately financed into the indefinite future because current law provides financing from general revenues." 

Essentially, this means it has an unlimited claim on federal funds. And that, in turn, means that it will extract more and more from taxpayers—or, as the Trustees report puts it: Due to "the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries." 

The problem, in other words, isn't the particular financing mechanism. It's runaway spending growth and the health program's underlying structure, which does little to meaningfully control costs. 

Looked at one way, Medicare's looming insolvency is hardly news. The program has been fiscally shaky for years now, and last year's Trustees report similarly projected that the HI fund would be depleted in 2026. This year's report just reiterates that the fund is still set to run out of money well before the end of the decade. 

At the same time, the fact that it's not news is itself notable. This is something the political class should be talking about. But they're not.

We've now made it through the 2020 presidential election, which means we are one presidential election away from one of Medicare's key funds becoming insolvent. The next president is going to have to deal with this. 

And yet, unless you're the sort of person who watches budget committee hearings and reads reports about entitlement financing, you've probably heard very little about the shortfall. Certainly, it's hardly been an issue in national politics. 

If anything, both of the last two presidents have promised to not solve Medicare's fiscal problems. Former President Donald Trump repeatedly insisted that he wouldn't raise taxes or reduce spending on Medicare. President Joe Biden, meanwhile, has proposed a substantial expansion of Medicare, adding an array of new benefits as part of the $3.5 trillion budget reconciliation plan now working its way through Congress. Needless to say, Biden's plan to expand Medicare would not fix its looming fiscal woes. 

Indeed, it is notable how little attention has been paid to entitlement financing in recent years. Under President Barack Obama, at least, the interaction between entitlement financing and federal debt and deficits was a live issue. Since total federal debt is essentially a product of annual deficits, and the deficit is merely a measure of the gap between tax revenues and spending, the commissions tended to recommend some combination of tax revenue increases and spending reductions. Tax rates might have to be raised. Entitlements might have to be trimmed. 

Naturally, none of this ever happened. 

And now a major health care entitlement is on track to effectively trim itself in less time than it takes George R.R. Martin to write a book. For Medicare, winter is coming.

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  1. It’s runaway spending growth and the health program’s underlying structure, which does little to meaningfully control costs.

    This can’t be true, Obama said he bent the cost curve. Along with keeping his pledge to not get us into anymore dumb wars and fixing the civil rights abuses of the Patriot Act.

    1. Should of continued reading:

      Under President Barack Obama, at least, the interaction between entitlement financing and federal debt and deficits was a live issue.

      Lol, well he did lie about it a whole lot.

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    2. Maybe he was too busy fixing the rise of the oceans to worry about medicare.

      1. Hey, Martha’s Vineyard isn’t underwater yet, so yeah.

        1. Why else would he be worried about it?

      2. Right, the oceans that thanks to over a century of hard data collected by the coast guard, has risen 0.0%. I’m glad someone is on that problem.


    I believe most of the Reason staff weren’t even born when this article was written. I mean, typed on a Smith Corona.

    The Reagan Administration reported today that the financial outlook for the Social Security trust fund had ”dramatically improved” in the last 12 months but that the Medicare trust fund was in a precarious position, facing insolvency around 1990.

    1. Yes, but this time is different! That’s what the Democrats (and many Republicans) say as an excuse to keep kicking the can down the street.

      Eventually they will run out of creative accounting tricks, and then we will be screwed. But as long as government pretends that money comes from nothing, we can keep pretending that there is no problem. I fear the day they reach into their bag of tricks and discover hyperinflation.

    2. In 1990 the national debt was 3.1 trillion dollars.
      Today it is 28.7 trillion dollars.

      This time it is different — it’s much, much worse.

      1. It’s not the increase year vs year that matters. It is the relation of each to GDP.

        In 1990 GDP was roughly $ 6 trillion, while in 2020 it was $ 21 trillion.

        It was at least arguable that the former was manageable. There can be little debate that the latter is an indication that an end of some sort is approaching.

        We can’t all be Japan.

    3. Trust fund, shmush fund.
      It was ruled on, long ago, that SS and Medicare were just part of the tax-and-spend function of FEDGOV.
      Medicare will always be funded by the treasury, regardless of the “contributions” made by workers and premiums paid by retirees.
      It is the same with Social Security.

  3. Indeed, it is notable how little attention has been paid to entitlement financing in recent years.

    *looks around*

    I guess. Sure. Yeah, ok.

  4. No worries; eliminate (not reduce) all cabinet level positions not specified in the US Constitution, and use those funds.

    1. Can we just eliminate medicare then? It’s not specified in the US Constitution, and that would solve the problem.

      1. That will never happen. Actually it is more likely to go the other way with expanded Medicare. I am looking forward to Medicare and social security. Then I can go to part time work. Right now I need my employer based insurance.

        Or they can just write me a check for all I have paid into it with compounded interest. Then I could just get a place by the beach and hang out at the beach bar drinking rum and watching all of the pretty scenery walking by.

  5. Two possibilities, Biden and Congress raise the medicare payroll tax on people making less than $400k per year. Hmmm, right, not when the problem is five years out…

    …or they let GOP do it and say they didn’t raise taxes.

    Either way democrats are scumbags for ignoring problems and fucking them up worse.

    Wag your finger all you want you senile old shitbag Biden, you fucked up.

  6. Money printer go brrrrrr

    1. Yeah, I don’t really understand the pearl clutching here. The government rules 3+ trillion dollar deficits for multiple years running and suddenly we’re supposed to wonder where Uncle Sam is going to come up with a couple billion?

  7. >>Under President Barack Obama, at least, the interaction between entitlement financing and federal debt and deficits was a live issue.

    everyone was full of shit but at least the lies were alive. also never start a sentence with Indeed.

  8. Congress is insolvent today. The national debt is over 28 trillion dollars, and taxes barely bring in 5 trillion per year. The debt isn’t at “100% of GDP”, Congress has spent us into debt worth 6 years of income (to the government), income that is already spoken for.

    1. Yeah, the entire government is insolvent. Why we’re picking on Medicare, I know not.

    2. The national debt is over 28 trillion dollars, and taxes barely bring in 5 trillion per year. The debt isn’t at “100% of GDP”, Congress has spent us into debt worth 6 years of income (to the government), income that is already spoken for.

      If you’re going to talk about income already spoken for, you should mention debt also spoken for. The total debt obligations bring the total well over 50 trillion, especially if you assume federal bailout of state pensions.

    3. 28 trillion dollars —
      The amount of citizen’s Gov-Gun-Forced SLAVE LABOR the Gov-Gods have spent on ?your? behalf without your willful consent.

  9. what program *does* pay “all of its bills”?

    1. Cowboy poetry festival.

  10. When you’re interred in a Chinese slave-labor camp, Medicare is going to be the least of your worries.

  11. It’s not just fiscal mismanagement on the part of Medicare. Someone should take a look at the health industry’s pricing. When a hospital charges $10 for a single Tylenol, you know something stinks. Medical costs have to be trimmed. If they were even close to affordable, medical assistance programs wouldn’t be in such trouble.

    1. Problem — Nobody cares about price (*free shit*) and competition is monopolized by regulation. It’s the failures of communism and socialism with a track record longer than the universe.

  12. Obama and the Democrats fixed the healthcare system with the “Affordable Care Act” in 2010. Either this article is a farce or President Obama, Nancy Pelosi, Chuck Schumer and the Democrats fielded a bold-faced lie to Americans about their legislation. Which could it be? Isn’t perjury and malfeasance a crime?

  13. How long until entitlement spending makes the US insolvent?

    1. Obamacare was that iceberg.

  14. paying whatever it takes to help the elderly alive as long as possible is not a prudent use of resources, regardless of how uncomfortable that might make some people feel.

  15. We’ve got five years
    My brain hurts a lot

    1. Nice. I love that song.

  16. As someone staring down the barrel of this mess, I’d say get rid of the whole damn thing and let people but their own insurance if they want it, otherwise they can pay cash or rot. My Methodist upbringing however says that it’s probably right to take care of those who really can’t take care of themselves (not through failure to plan, but through mental or physical defect). But for the other 98% of the population: plan ahead, and don’t expect someone else to pay for your stuff.

    1. We are all free to help all the people we want. Putting the State Apparatus in the middle of it is the worst thing you can do.

    2. Thing is they did plan ahead. They started paying for it when they got their first paycheck. It is not exactly charity.

      The other thing is that insurance companies charge you by age bracket. Hardly any 65 year old would be able to afford it. As it is most people don’t save enough for retirement.

      The hospital system as we know it would collapse without Medicare.

      There is no way to untie this knot.

      1. The way to untie the knot is to start.

        Those of us who are well off don’t need it, and are planning on taking the joke from medicare and adding it to our own money and buying a decent insurance plan.

        Medicare is killing hospitals, they can’t even recoup their costs let alone any sort of profit.

        Of course insurance companies charge by age, and they should be y sex and any other definable characteristic. Why should I pay for medical care for some obese smoker, or 19 year old pregnant indigent? Maybe smooth it out so that I can keep the same (high deductible) coverage that I’ve had for many years, working with the assumption that I would have paid slightly higher premiums 10 years ago to cover the actuarial cost of the future me, but let’s have some realism here.

        But let’s get rid of the mandatory charity part. There’s a big difference between that and pooling costs for a roughly similar population.

        1. Medicare starts at 65. Not 19. That might be Medicaid if the person is indigent.

          So around 21% of revenue to a typical hospital is Medicare. Around 13% is Medicaid.

          Hospitals are not high profit enterprises. Typically they lose money on a regular basis. The vast majority are non profits.

          Teaching and research hospitals especially walk a narrow line. If you take away 20% or more many will fail.

          So patients who cannot pay will not be turned away. You will pay for them one way or another. The $85 dollar Tylenol. The $1000 added to your bill to the ED in various ways.

          Not a box of cornflakes.

  17. Then let it go the way of the dinosaurs.

  18. It’s not discussed at all, as far as I have seen, because it is ghoulish, but COVID-19 deaths, which are more prevalent in the elderly, may relieve burdens on future entitlements:

    1. i’ve thought about this but the impression i’ve gotten is that the fatalities are barely enough to make a blip.

      I am not saying i want this (despite my previous comment about it being somewhat foolish to sink so many resources into keeping the very old alive), but it would really take like MILLIONS of prematurely dead boomers to really provide any financial relief on these programs.

      1. Fauci meeds to work harder then.

  19. When I was 15 (over 40 years ago), I ran across news stories on Soc Sec/Medicare’s financing woes. The prediction was that they’d go broke in about 50 years. I may not have been a math genius, but I could do 15 + 50 = 65. I figured either I was screwed or the adults would fix it.

    That “go broke” date hasn’t changed much since then so I guess I’m screwed.

    When my left-leaning friends ask me why I don’t trust government I respond “Social Security. The government has known for DECADES that it was going broke and has failed to fix it.”

    They’re still whistling past the graveyard and the deadline is coming soon. The longer we wait, the worse the “solution” will be.

    1. Ask them if they want the same people that botched leaving Afghanistan overseeing their healthcare and retirement.

      1. Even better, ask them if they want the healthcare that the VA provides.

    2. I was an economics student doing the demographic models and saw it coming. At that time we could read statements from JFK saying they needed to do something about the looming financial problems of SS. SS and Medicare were never financially sound from inception.

      1. Boomers are consumers and want someone else to pick up the tab for their non-sustainable lifestyle.

        1. Sure like I said earlier. They can just write me a check for all of the FICA tax I have paid with compounded interest. My unsustainable lifestyle would get a whole lot better.

  20. Politicians know voters will not stand for cuts to Medicare.

    1. Aye, there’s the rub.

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  22. If Medicare were private it would properly be called insurance fraud and those running it prosecuted. Still sounds like a good idea to me.

    1. ^THIS; And congress breaking the people’s law (the U.S. Constitution) should be prosecuted also which would’ve prevented the whole fraud from occurring. But good old FDR threatened to stuff the courts – of which Biden’s been playing the same game.

      The Nazi’s (def; National Socialists) know from historical mistakes how to make them keep happening. Promise the citizens to commit armed robbery against ‘those’ minority citizens and pass out their *stolen* stuff. Just like the days of slavery – democrats can’t seem to change their spots. If the citizens won’t hold criminal politicians accountable who will?

  23. Proggies never seem to learn that when you hand out shit ‘for free’, there’s never enough of it.

    1. “The problem with socialism is that sooner or later, you run out of other people’s money” Margaret Thatcher

      “The problem with socialism is that sooner or later, someone has to actually work” Groundtruth

  24. Wonderful – I turn 65 in 3 1/2 years, so I’ll get to enjoy Medicare for a little while before it becomes insolvent. Bernie Sanders and Liz Warren told me Jeff Bezos was going to pay for it all.

  25. So according to Democrats, now is a great time to expand Medicare benefits!

    Says AOC: “You just pay for it”…implying that the expanded Medicare will be cheaper than what you’re already paying.

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