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Medicare is the second-largest federal program in the United States. The Medicare program has two separate trust funds, the Hospital Insurance trust fund (HI) and the Supplementary Medical Insurance trust fund (SMI). In 2023, the program covered 66.7 million people – 59.1 million aged 65 and older and 7.6 million disabled – and had total annual expenditures of $1.037 trillion.

Because of rising health care costs and the fact that the number of Medicare beneficiaries are rising faster than the number of U.S. workers, Medicare is becoming increasingly strained.

The Board of Trustees of the Medicare trust funds projects that costs “will increase at a faster pace in future years than either aggregate workers’ earnings or the economy overall. Spending as a percentage of GDP is projected to increase from 3.8 percent in 2024 to 6.7 percent by 2099. Under the relatively higher price increases for physicians and other health services assumed for the illustrative alternative projection, Medicare spending would represent roughly 8.8 percent of GDP in 2099. Growth under either of these scenarios would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the Federal budget. The Trustees project that HI tax income and other non-interest income will fall short of HI incurred expenditures beginning in 2027. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.”

The Congressional Budget Office (CBO) warns that “net federal spending on major health care programs – which include Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) – increases from 5.6 percent of GDP in 2024 to 8.3 percent of GDP in 2054. The primary driver of that increase is spending on Medicare, which accounts for over half of all spending on the major health care programs in 2024 and over two-thirds of it in 2054.”