Medicare Advantage

Medicare Could Become Insolvent

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Medicare is projected to run out of funds by 2028 – two years earlier than predicted last year – according to a new report by the program’s trustees. Last year, trustees of the Medicare Hospital Insurance Trust Fund predicted that the program would reach insolvency by 2030. That prediction has changed this year, and now the trustees are reporting that the program will no longer be solvent by 2028. The Social Security trust fund will be depleted by 2034 while Social Security disability insurance will face insolvency by 2023.

Several factors have contributed to the new projections, including new income and cost estimates. The trustee report suggests that costs will rise at a rate of 5.4 percent over the next five years. For the last five years, the annual growth rate has been 2.4 percent. Social Security recipients saw no cost-of-living adjustment in 2016 due primarily to the decline in energy prices, which affects the inflation gauge.

Even if the trust funds hit insolvency, benefits would not stop abruptly. Once the program reaches insolvency by 2028, Medicare could cover about 87 percent of hospital costs for beneficiaries. By 2043, the program would cover 79 percent of costs. According to, trustees also report that Social Security would be able to cover about 75 percent of scheduled benefits from 2034 to 2090.

Politicians on both sides of the congressional aisle have offered solutions to Medicare’s impending financial problems. A Republican-backed proposal would gradually increase the age limit for Medicare to 67. The Republican plan also would allow seniors to choose from traditional Medicare or a subsidized private plan starting in 2024.

Democratic Labor Secretary Thomas Perez proposed adopting a Canadian approach to paid family leave and child care. He argues that granting more generous leave time would keep 5 million women in the workforce while adding $5 billion to Medicare and $20 billion to Social Security in 2016.

Despite the new shorter timeline, trustees and the Obama administration are quick to point out that the program is expected to remain solvent for 11 years longer than it would have before the passage of the Affordable Care Act in 2010. The ACA has effectively lengthened Medicare’s lifespan. Still, Medicare beneficiaries and financial analysts are concerned about the program’s long-term health in light of the new findings.