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Medicare Finances: Findings of the 2006 Trustees Report

By: Paul N. Van de Water and Joni Lavery
Published: May 2006
Medicare Brief No. 13 ~ May 2006

Summary:
Medicare helps pay medical expenses for 37 million Americans age 65 and older and 6 million persons with disabilities. The benefits are financed primarily by dedicated taxes on wages and self-employment income, premiums paid by beneficiaries, and payments from general revenues. According to the 2006 report of Medicare's trustees, Medicare's Hospital Insurance (HI) program is not adequately financed. The HI trust fund is projected to start drawing down its reserves in 2010. Its reserves will be depleted in 2018, at which time scheduled income will cover 80 percent of estimated expenditures. The Supplementary Medical Insurance program is adequately financed but will require continuing increases in both premiums and general revenue contributions. Medicare spending is growing rapidly because of increases in the cost and use of medical services. Total Medicare expenditures are projected to grow from 2.7 percent of gross domestic product (GDP) in 2005 to 9.0 percent of GDP in 2050.

A brief summarizing the findings in the Social Security report, Social Security Finances: Findings of the 2006 Trustees Report is also available.