An Update on Medicare’s Finances

The brief’s key findings are:

• The headline from the 2018 Trustees Report was an earlier depletion date for the Hospital Insurance (HI) trust fund, suggesting Medicare faces growing trouble.

• However, the trust fund reserves are small compared to HI expenditures, and the HI component only accounts for about a third of the Medicare system.

• In fact, Medicare’s outlook is considerably better than it was a decade ago, even under projections that assume policymakers curb some recent cost controls.

• Despite the improvement, Medicare does face financing challenges because it:

  • has to operate within the very expensive U.S. health care system;

  • requires beneficiaries to pay substantial out-of-pocket costs; and

  • has some serious gaps in insurance protection.

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