Medicare Part A Hospital Trust Fund Is At Risk

The Medicare Trustees’ 2024 report stated that the Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2036, five years later than reported last year. At that point, that fund’s reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits.

The HI Trust Fund provides the funding for traditional Medicare Part A. Part A, which covers inpatient hospital stays, skilled nursing facility (SNF) stays, some home health visits, and hospice care, is financed primarily through a 2.9% tax on earnings paid by employers and employees (1.45% each). Higher-income taxpayers (more than $200,000 per individual and $250,000 per couple) pay a higher payroll tax on earnings (2.35%). Payroll taxes accounted for 88% of Part A revenue in 2023.

The Medicare Part A funding dilemma. In the coming decade, based on current projections from the Medicare trustees, Part A spending will exceed Part A revenues beginning in 2030, leading to a gradual reduction in the level of reserves in the HI trust fund. By 2033, the Medicare trustees project that the HI trust fund will begin the year with $254 billion in reserves, but because spending is projected to exceed revenue by $55 billion that year, the trust fund is expected to end the year with $198 billion in reserves. As Part A spending is projected to continue to exceed Part A revenues in the years that follow, the reserves will be depleted at some point during 2036 and would be able to pay only 89% of scheduled benefits. 

What will it take for Medicare Part A to be secure? The Medicare Trustees estimate that an increase of 0.35% of taxable payroll (increasing the 2.9% payroll tax to 3.25%) or a spending reduction of 8% would bring the HI trust fund into balance over the 75-year projection period.

• The Medicare Trustees estimate that an increase of 0.35% of taxable payroll (increasing the 2.9% payroll tax to 3.25%) or a spending reduction of 8% would bring the HI trust fund (Part A) into balance over the 75-year projection period. You may have working age grandchildren and/or great grandchildren. Would you prefer to see them pay an increase in payroll tax or seniors have a reduction in Medicare Part A benefits?

The NRLN looks forward to reading your response to the above question and any other comments you may have on the Medicare Part A Hospital Insurance Trust Fund.