Medicare’s Financial Health Continues to Improve, but Trust Fund Still Needs Shoring Up

The Medicare trust fund that helps pay for inpatient hospital stays is in better shape than last year, a trend that started in 2022, according to officials who oversee Medicare’s finances.

The Part A Hospital Insurance fund will be able to pay all its bills until 2036, five years later than reported last year and eight years later than the 2022 estimate, the trustees said in their 2024 annual report, released May 6. In 2036, the trust fund still would be able to cover 89 percent of Medicare costs with incoming tax revenue.

“While there was good news today in the trustees reports, older Americans need certainty that Medicare and Social Security will be protected,” AARP CEO Jo Ann Jenkins says. Social Security’s trust funds are expected to run short of money by 2035, a year later than this past year’s estimate.

Reasons for the better Medicare outlook

The Medicare report attributes the improvement to several factors:

• Higher payroll tax income because the number of covered workers and average wages are projected to be higher.
• Spending for inpatient hospital and home health agency services that were lower than previously expected.
• A change in how Medicare Advantage rates were set starting in 2024.

“Social Security is the largest source of retirement income for most retirees, and Medicare is the primary and only source of health care for most people age 65 and older,” Jenkins says. “Older Americans make up the nation’s largest voting bloc and will hold leaders in Washington accountable if they fail to protect these programs.”

The trustees say that the Supplementary Medical Insurance (SMI) trust fund, which includes Part B doctors’ services and outpatient care and Part D prescription drugs, will have enough money indefinitely because premiums and federal contributions are automatically adjusted each year to cover costs.

The trustees project that the monthly premium for Medicare Part B will increase to $185 in 2025, up from $174.70 in 2024 and $164.90 in 2023. The 2025 Part B premium will be finalized in the fall.