Claims by some policymakers that the Medicare program is nearing “bankruptcy” are highly misleading. Although Medicare faces financing challenges, the program is not on the verge of bankruptcy or ceasing to operate. Such charges represent misunderstanding (or misrepresentation) of Medicare’s finances.
The 2018 report of Medicare’s trustees finds that Medicare’s Hospital Insurance (HI) trust fund will remain solvent — that is, able to pay 100 percent of the costs of the hospital insurance coverage that Medicare provides — through 2026. Even in 2026, when the HI trust fund is projected to be depleted, incoming payroll taxes and other revenue will still be sufficient to pay 91 percent of Medicare hospital insurance costs.
[1] The share of costs covered by dedicated revenues will decline slowly to 78 percent in 2042 and then rise gradually to 85 percent in 2092. This shortfall will need to be closed through raising revenues, slowing the growth in costs, or most likely both. But the Medicare hospital insurance program will not run out of all financial resources and cease to operate after 2026, as the “bankruptcy” term may suggest.