--- title: 'Medicare Won’t Have Enough Money to Pay Full Benefits After 2031: Report' description: A new report forecasts that the fund covering Medicare's hospital insurance benefits could run out of money in 2031. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 497 covers: - Insurance - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Insurance - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2023-04-05T18:28:57.000Z' modified: '2024-04-17T13:07:24.000Z' section: Insurance tags: - News word_count: 924 canonical: https://money.com/medicare-running-out-of-money-2031/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Senior woman registering at the reception of a hospital and nurse asking her to fill a form](https://img.money.com/2023/04/News-When-Medicare-Expected-Run-Out-Funding.jpg) The fund covering [Medicare](https://money.com/what-is-medicare/)'s hospital-insurance benefits is now projected to run out of money in 2031, according to a new report by Medicare trustees. This new insolvency date gives policymakers three more years than previously estimated to address impending financial setbacks that are facing the social safety net program, which provides health care benefits to tens of millions of Americans. The ultimate insolvency date will likely change, the trustees say, due to difficulties in accurately projecting program expenditures. That leaves the exact timeline unclear for lawmakers to hash out a plan to mend Medicare's finances, which could require an increase in taxes, a cut in benefits or a combination of both to keep benefits paying out in full. ## Long-Term Care Insurance allows you to know that you and your loved ones are financially protected as you age ### Regular health insurance, disability insurance, and Medicare are not designed to cover long-term care costs. Get Long-Term Care Insurance today - select your state to get a free quote. [View Rates](https://money.com/pr/b569008ea8c5?ap_referrer=%2Fmedicare-running-out-of-money-2031%2F&url=%2Flong-term-care-insurance%2Flp%2Fbest-long-term-care-insurance-money) ## What the report says In a [report](https://www.cms.gov/oact/tr/2023) released Friday, Medicare’s Board of Trustees provided the latest snapshot of the program’s finances. On the whole, Medicare is on sounder financial footing than indicated in last year’s trustee report, though financial shortfalls still loom. - Medicare hospital insurance benefits, aka [Medicare Part A](https://www.medicare.gov/what-medicare-covers/what-part-a-covers), are expected to fully pay out until 2031, a three-year improvement from the last trustee report. - Medicare [Part B](https://money.com/medicare-premiums-decrease-2023/) and Part D do not face insolvency, the report said, because they are funded separately — partially by premiums and general revenue from the U.S. Department of the Treasury. These benefits help cover typical [health-insurance](https://money.com/health-care-costs-lifetime/) and [prescription-drug expenses](https://money.com/prescriptions-skipped-drug-cost/), respectively. - By contrast, Medicare Part A, which generally covers inpatient hospital care, skilled-nursing facility care, home-health care and hospice care, uses a separate reserve that’s funded by a 2.9% Medicare payroll tax. This is the trust fund at risk of insolvency. - In 2022, Medicare’s balance sheet looked better than previous years, the report shows. The hospital-insurance trust fund had a surplus of $54 billion, and Medicare overall brought in about $84 billion more than it paid out. - Nearly every year since 2008, the Part A trust fund has run a deficit, the report notes, with the exception of 2021 and 2022. The fund ran a steep shortfall in 2020 of more than $60 billion, largely because Medicare began making loans to health care providers to increase their cash flow as they grappled with the COVID-19 crisis. Then in 2021, providers began to repay Medicare, leading to the current surpluses. The surpluses aren’t expected to last, however. Medicare trustees say the Part A program will begin running deficits again in 2025, drawing down the trust fund until it depletes in 2031. After that date, the program would not be bringing in enough money to fully pay out Part A benefits. ## Get the care you will need after age 65 ### 70% of people 65+ will require long-term care. A Long-Term Care Insurance policy makes the process easier by helping you pay for the care you need in your golden years. [View Rates](https://money.com/pr/k696436a32ba?ap_referrer=%2Fmedicare-running-out-of-money-2031%2F&url=%2Flong-term-care-insurance%2Flp%2Fabm-pub-best-ltc-insurance) ## Key context Medicare covered 65 million Americans last year. The vast majority of those people, about 88%, were 65 or older, though the program also provides health coverage to millions of disabled Americans. - Medicare — particularly Part A — has long faced [financial issues](https://money.com/social-security-run-out-date/). The nation’s changing demographic makeup is a big reason why. Because Medicare Part A relies on payroll taxes, it is more susceptible to insolvency when a growing share of the population is older, ultimately changing the worker-to-beneficiary ratio. In other words: less money coming in and more money going out. These demographic changes are also leading to [insolvency issues for Social Security](https://money.com/social-security-run-dry-report/). - Compared to Social Security, projections for Medicare’s insolvency are less certain because it’s difficult for the trustees to accurately predict future health care expenditures. This can lead to some larger swings in the predicted insolvency date. By contrast to the trustee’s estimate, the Congressional Budget Office estimates the fund will remain solvent until 2033. - According to the nonprofit Center on Budget and Policy Priorities (CBPP), if Medicare Part A went insolvent, it would still be able to pay out almost all benefits. This leads some experts to call for tempered reactions to the newly projected insolvency date. - “Medicare does not face a financing ‘crisis’ and is not ‘bankrupt,’ as some critics charge,” [tweeted](https://twitter.com/PaulNVandeWater/status/1641834295726678016) Paul Van de Water, a senior fellow at the CBPP who specializes in Medicare. “Even if policymakers took no further action … tax revenues would still cover 89 percent of scheduled benefits" after the insolvency date. ## Avoiding Medicare insolvency Policymakers have several options to avoid impending insolvency headed for Medicare Part A. The trustees note two options that could immediately solve the issue: - The standard 2.9% payroll tax could be immediately raised to 3.52%, which would be enough to plug any financial shortfalls over the next 75 years. - In lieu of a tax increase, expenditures (read: benefits) would need to be reduced immediately by 13%, the trustees say. Realistically, a combination of the two could work and the benefits cuts and/or tax increases could be implemented over a longer period of time. Additionally, President Joe Biden [released a plan last month](https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/07/fact-sheet-the-presidents-budget-extending-medicare-solvency-by-25-years-or-more-strengthening-medicare-and-lowering-health-care-costs/) to push the insolvency date back by 25 years. - The central change under the president’s plan would be a Medicare payroll tax increase on Americans earning more than $400,000. - Currently, earnings over $200,000 for individuals are taxed at 3.8% (while income under that amount is taxed at the standard 2.9% rate). These rates are split 50-50 between employees and employers. - The president’s plan introduces a new tier for income over $400,000, a tax rate of 5%. The president’s Medicare proposal — part of a larger 2024 budget plan — is not expected to make it through the Republican-controlled House of Representatives. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/medicare-running-out-of-money-2031/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Insurance", "item": "https://money.com/insurance/" }, { "@type": "ListItem", "position": 3, "name": "Medicare Won’t Have Enough Money to Pay Full Benefits After 2031: Report" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/medicare-running-out-of-money-2031/#webpage", "url": "https://money.com/medicare-running-out-of-money-2031/", "name": "Medicare Won’t Have Enough Money to Pay Full Benefits After 2031: Report", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-04-05T18:28:57.000Z", "mainEntity": { "@id": "https://money.com/medicare-running-out-of-money-2031/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/medicare-running-out-of-money-2031/#breadcrumb" }, "dateModified": "2024-04-17T13:07:24.000Z" }, { "@type": "NewsArticle", "headline": "Medicare Won’t Have Enough Money to Pay Full Benefits After 2031: Report", "articleSection": "Insurance", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/04/News-When-Medicare-Expected-Run-Out-Funding.jpg", "width": 2880, "height": 1920, "caption": "News-When-Medicare-Expected-Run-Out-Funding" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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