Medicare trust fund will be exhausted in 2026, three years earlier than expected

New depletion date is blamed on lower payroll taxes, less revenue from taxing Social Security benefits and higher-than-expected spending

Jun 5, 2018 @ 2:46 pm

By Bloomberg News

The main trust fund behind Medicare, the U.S. health-care program for the elderly and disabled, will be exhausted in 2026, three years earlier than was projected a year ago, the government said Tuesday.

Medicare's Board of Trustees blamed the earlier depletion forecast on lower payroll taxes in 2017 as a result of lower wages, less revenue from taxing Social Security benefits and higher-than-expected spending last year.

"As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years," the report said.

Each year, the trustees project the long-term finances of Medicare, which covers about 58 million Americans. Medicare spent $710 billion in 2017, according to the report, making it the single biggest purchaser of health services in the U.S. The trustees include Treasury Secretary Steven Mnuchin and Health and Human Services Secretary Alex Azar.

Medicare's trust fund pays for hospital visits, nursing care and related services under what's known as Part A of the program, which was created in 1965. Medicare Part B, which covers outpatient visits, and Part D, which pays for most prescription drugs, are paid for in part by general revenue and by individuals' premiums. That means those programs don't face a risk of funds running out.

The trustees expect Medicare spending "will increase in future years at a faster pace than either aggregate workers' earnings or the economy overall."

Medicare spending as a percentage of gross domestic product totaled 3.7% in 2017, and the trustees project it will increase to at least 6.2% by 2092.

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