Medicare Finances: Findings of the 2012 Trustees Report

Health Policy Brief No. 3 (Revised April 24th at 10am)

Summary: Medicare is the federal health insurance program for Americans aged 65 and older and younger adults with disabilities. Medicare’s finances are managed through two trust funds: the Hospital Insurance (HI) Trust Fund (which pays for Part A benefits) and the Supplementary Medical Insurance (SMI) Trust Fund (which pays for Part B and Part D benefits). Each year, the Medicare Trustees give a detailed account of the expected condition of the program’s two trust funds over the short and long-term.

According to the 2012 Trustees Report, expenditures from Medicare’s HI Trust Fund exceeded revenues by $27.7 billion in 2011. Without a policy change that would increase revenues or reduce expenditures, the accumulated surplus in the HI Trust Fund will be depleted by 2024, the same as last year’s projection; after that, the HI Trust Fund would rely on the annual revenues from Medicare payroll taxes, which are projected to cover 87 percent of annual expenditures.