According to a new report from the Congressional Budget Office, the Hospital Insurance (HI) Trust Fund, used to pay for benefits under Medicare Part A, will be exhausted in 2040, “12 years earlier than in our most recent estimate of that date, which was published in March 2025,” primarily due to loss of revenue from Trump’s so-called “Big Beautiful Bill.” There were also projected increases in costs. However, it’s still seven years later than it was before the Affordable Care Act was passed in 2010.
The date does not apply to Medicare coverage for physician and outpatient costs (Part B) or to the Medicare prescription drug benefit (Part D), which are financed through a different trust fund. Medicare Part A covers inpatient hospital services, care provided in skilled nursing facilities, home health care, and hospice care.
While the change is dramatic, it remains uncertain given the nature of long-term projections. Such projections have varied significantly in the past, and cost increases have dropped significantly since the passage of the Affordable Care Act. Still, it’s a worrying development.
The program “will not run out of all financial resources and cease to operate … as the ‘bankruptcy’ term may suggest,” Paul Van de Water, an expert with the Center on Budget and Policy Priorities, explained last year. But changes are called for to maintain full coverage.
“This report confirms Trump’s economy and Republicans’ Big, Ugly, Law, with their billionaire tax cuts and wealthy handouts, are putting lives at risk by drying up funding that covers critical care for seniors and people with disabilities,” said Rep. Richard Neal, ranking member of the House Ways and Means Committee.
“Despite their assurances otherwise, the facts prove once again that Trump and Republicans are cutting and sabotaging Medicare,” Neal said. Whether it’s from your wallet or your health care, they are looting every dollar they can to hand to the very top. As the effects from the greatest theft of health care in history continue to be exposed, the people will see this looting for what it is, and Democrats will do everything we can to not only reverse course but chart a better path.”
The report cited three main reasons for the drop in income:
- First, revenues from taxing Social Security benefits are smaller in the current projections because of changes put in place by the 2025 reconciliation act (Public Law 119-21), which lowered tax rates and created a temporary deduction for taxpayers age 65 or older.
- Second, we decreased our projections of revenues from payroll taxes to account for projections of lower earnings.
- Finally, we now project interest income credited to the trust fund to be smaller than estimated last year because of the smaller trust fund balances in this year’s projections.
On the spending side, it cited increases in “per-enrollee spending in Medicare Part A’s fee-for-service program in 2025” and “bids in 2026 by providers of Medicare Advantage plans” as the basis for projections of greater per-enrollee spending.
In the past, Democrats have proposed raising or eliminating the cap on payroll taxes as a straightforward way to increase revenues.