By: Sabiha Zainulbhai and Lee Goldberg

Published: May, 2013

May 2013 ~ Health Policy Brief No.  6

Summary: Medicare is the federal health insurance program for Americans age 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 terms.

According to the 2013 Trustees Report, expenditures from Medicare’s HI Trust Fund exceeded revenues by $23.8 billion in 2012. Without a policy change that would increase revenues or reduce expenditures, the surplus that has accumulated to the HI Trust Fund since the program’s inception will be depleted by 2026; after that, the HI Trust Fund would rely on the annual revenues from Medicare payroll taxes and to a lesser extent, its other sources of income, which together are projected to cover 87 percent of annual expenditures.

This year’s report reflects small improvements in Medicare’s financial outlook. The projected solvency date for the HI Trust Fund is two years later than last year’s report. The 75-year actuarial deficit for the HI Trust Fund has decreased from 1.35 percent to 1.11 percent of taxable payroll.

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