What’s in the 2026 Medicare Trustees Report?

Overview

Released on June 9, 2026, the 2026 Medicare Trustees report concludes that Medicare remains on an unsustainable course given rising per beneficiary spending and the advancing age of the largest segment of our population, the baby boomer generation.

In addition, the trustees project that Medicare expenditures will nearly double as a share of the U.S. economy in the next 25 years, rising from 3.9% of GDP in 2025 to 6.5% by 2050 under current law.

The Medicare Trustees now predict that the Medicare Hospital Insurance (HI) Part A Trust Fund will be depleted in the second quarter of 2033, which is one quarter earlier than projected in last year’s report. The Part A Trust Fund, which pays for Medicare fee-for-service (FFS) and Medicare Advantage (MA) hospital inpatient, hospice, skilled nursing facility, and several other post-acute care services, is largely financed through a dedicated payroll tax.

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Key financial indicators, 2026 vs. 2025 Medicare Trustees Report

HI depletion date

Q2 2033

1 quarter earlier 2025 report: also 2033, later in year

HI actuarial deficit

0.56%

↑ from 0.42% % of taxable payroll; illus. alt. 1.38% vs. 1.28%

75-year unfunded obligation

$4.2T

Part A only 0.2% of GDP over 75-year window

Medicare / GDP (base year)

3.9%

vs. 3.8% (2025 rpt, 2024) 2026 report base year: 2025

Medicare / GDP (end of period)

7.5%

↑ from 6.7% by 2099 2026 rpt: by 2100; 2025 rpt: by 2099

Medicare Advantage enrollment

51%

↑ from 50% in 2024 Projected 56% by 2035; was 12.8% in 2004

Source: 2026 Annual Report of the Boards of Trustees of the Federal HI and SMI Trust Funds (June 9, 2026); 2025 Annual Report (June 18, 2025). HI key results from Table II.A1. Medicare Advantage enrollment from Section II.A Highlights. BPC Health Policy Program analysis.

In 2033, the reserves of the Part A Trust Fund ($255.7 billion in 2026) will erode to zero and the program will then be able to pay only 89% of its costs. The trustees report that expenditures will begin to exceed trust fund income beginning in 2027. The reserves of the trust fund, built up over many years, will slowly erode over the next seven years and result in a financing gap beginning in the second quarter of 2033.

As an illustration of the magnitude of the Part A Trust Fund solvency gap, the trustees report that, to achieve fiscal balance of the trust fund over the 75-year window, policymakers would have needed to reduce scheduled benefits starting in January 2026 by 12% or increase the Medicare payroll tax from 2.90% to 3.46%, a 19% increase in the Medicare payroll tax. If substantial actions are deferred until Part A Trust Fund reserves are depleted, then significantly larger changes will have to be concentrated into a shorter window of time.

An Aging Population Underlies the Steepest Cost Growth

The report projects that Part A Trust Fund expenditure growth over the next 10 years will be highest for services typically associated with an aging beneficiary population, such as skilled nursing facility (SNF), home health, and hospice services. While the trustees project that the cost for inpatient hospital services will grow at a rate of 4.8% annually over the next decade, expenditures for SNF, home health, and hospice are projected to grow 7.0%, 7.3%, and 8.9% respectively. This higher expenditure growth may suggest areas of need for policymaking to ensure access and affordability for beneficiaries and efficiency in the use of a limited pool of Medicare funds.

Shifts from Fee-For-Service to Medicare Advantage

Another important aspect of expenditure growth within the Part A trust fund is the continued but slowing shift of beneficiaries from the Medicare fee-for-service (FFS) program to the Medicare Advantage (MA) program. Over the last 10 years, there has been an annual shift in beneficiaries from FFS to MA ranging from 1% to 5%. However, the trustees project a dramatic slowing of this shift down to less than 1% per year from 2026 to 2035. Despite this slowing, the trustees also project MA-related expenditures within the Part A Trust Fund will exceed FFS expenditures by 2028.

Cost Rate Pressures

In addition to expenditure growth within the Medicare Part A Trust Fund, a critical variable driving Part A trust fund insolvency is the widening of the gap between expenditures and payroll taxes (referred to as the “cost rate”).

The trustees report that the 2025 cost rate is 3.37%, and it will grow to 3.49% by the end of 2026 and to 4.58% by 2050. This projected increase in the ratio of expenditures to payroll tax income is driven by key changes to demographic assumptions between the 2025 and 2026 reports and other policy changes. Specifically, the 2026 report reflects recent demographic and policy changes by assuming lower fertility and fewer temporary or unlawfully present immigrants, reducing both near-term tax revenues and the number of potential taxpayers over the long term.

Additionally, the 2025 reconciliation law, H.R. 1, permanently extends lower income tax rates and expands the standard deduction, including a new temporary deduction for taxpayers over age 65, a population experiencing significant growth over the next 10 years. This is projected to reduce income taxes paid on Social Security benefits, which are a dedicated revenue source for the Part A Trust Fund.

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Medicare Trustees Report 2026

HI income rate vs. cost rate as % of taxable payroll, 2025, 2100

Income rate = non-interest income ÷ taxable payroll. Cost rate = expenditures ÷ taxable payroll. Both rates converge at 3.49% in 2026 and permanently diverge as costs grow faster than revenues. The gap peaks at 0.70 percentage points in 2045 before narrowing as baby boom demographic pressure eases, but the HI trust fund is projected to be depleted by then (Q2 2033). All values from Table III.B7, 2026 Trustees Report.

Cost rate (expenditures) Income rate (non-interest revenues) Structural deficit gap

HI cost rate: 3.37% (2025), 3.49% (2026), rising to 4.54% (2045 peak), 4.86% (2100). Income rate: 3.47% (2025), 3.49% (2026), rising to 4.51% (2100). Gap peaks 0.70 pp in 2045. Source: Table III.B7.

Source: Table III.B7, 2026 Annual Report of the Boards of Trustees of the Federal HI and SMI Trust Funds (June 9, 2026). Income rate = HI non-interest income as % of taxable payroll. Cost rate = HI incurred expenditures as % of taxable payroll. Intermediate assumptions. BPC Health Policy Program analysis.

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SMI Trust Fund

The financial outlook for the Medicare SMI Trust Fund, which pays for physician services, hospital outpatient services, Part B drugs, Part D prescription drugs, and several other types of services, is not at risk of insolvency because it is financed through general federal tax revenues.

The trustees project overall SMI expenditures growth to increase rapidly over the next 10 years, with Part B expenditures growing 52% as a share of GDP and Part D prescription drug expenditures growing nearly 12% as a share of GDP. Within Part B expenditures, the trustees project more than 8% annual growth over the next 10 years for services such as hospital outpatient services and laboratory services conducted in physicians’ offices. The increase in hospital outpatient service expenditures may be due in part to the shift of services from the inpatient hospital setting to the outpatient hospital setting.

What Occurs if the Part A Trust Fund Becomes Insolvent?

If the Medicare Part A Trust Fund were to become insolvent in 2033, federal statute does not mandate how the trustees, CMS, HHS, or Congress should specifically resolve the imbalance between revenues and spending. To reduce expenditures, policymakers could choose to reduce payments uniformly across all providers or make more targeted reductions to certain providers. If provider payments were to be reduced, provider revenues would decline and could differentially impact providers serving higher shares of Medicare beneficiaries.

Policymakers could also elect to make other policy changes that would lower Medicare Part A expenditures, such as altering the benefit structure of Medicare FFS and Medicare Advantage, moving services financed under Part A to the SMI trust fund, altering the financing structure of the Part A Trust Fund, or other policy alternatives. Each of these policy changes would have important and variable consequences, including the potential to limit access to care through forced program changes impacting payments to providers and plans or benefits for enrollees.

What Bipartisan Reforms Could Strengthen Medicare?

The Bipartisan Policy Center has taken a leadership role in offering recommendations for bipartisan improvements to the Medicare program’s sustainability and effectiveness.

BPC Senior Vice President Bill Hoagland co-authored an article in Health Affairs Forefront with scholars at the American Enterprise Institute and the Brookings Institution discussing several pragmatic and potentially bipartisan Medicare reforms that could produce significant federal savings. This includes Medicare site neutrality policy, competitive bidding under the Medicare Advantage program, and restraining hospital consolidation. Going deeper, BPC experts undertook a comprehensive examination of Medicare’s fiscal and operational challenges in a 2023 report,Sustaining and Improving Medicare: The Path Forward.

BPC’s Health Agenda for 2026

For 2026, BPC’s Health Policy Program is committed to three interrelated pillars of work: affordability, aging, and innovation. The policies BPC will generate and advance in 2026 will:

Address rising health care costs and affordability challenges facing consumers and taxpayers, including in the Medicare program.

Support caregivers, strengthen financial security for older adults, and expand access to long-term care and other health-related social needs, including housing, to ensure that Americans can age with dignity.

Improve outcomes and reduce low-value spending through effective use of technology.

Together, these policies will help to slow the forces driving the Medicare Part A Trust Fund toward insolvency, delivering care in the most appropriate and cost-effective setting, building the aging infrastructure we need, and harnessing technology in service of a more affordable and effective health system.

This piece has been updated to reflect that a 12% reduction in expenditures would need to begin in 2026 to bring Part A Trust Fund revenues and expenditures into alignment.

The post What’s in the 2026 Medicare Trustees Report?  appeared first on Bipartisan Policy Center.