Social Security's woes are well known, but Medicare is also facing a fiscal crisis - in just 7 years

MW Social Security's woes are well known, but Medicare is also facing a fiscal crisis - in just 7 years

By Jessica Hall

Medicare Part A, which pays for inpatient hospital stays, would see an 11% payment cut

About 68 million people are currently enrolled in Medicare.

Not only is Social Security hurtling toward a financial crisis, but Medicare also faces automatic payment cuts in less than a decade, and that could put pressure on hospitals and reduce healthcare services for those enrolled in the healthcare program.

Medicare is the primary or only source of healthcare for most older Americans. About 68 million individuals are currently enrolled in Medicare, which covers those age 65 and older and people with disabilities.

The Hospital Insurance Trust Fund that supports Medicare Part A - which pays for inpatient hospital services, some short nursing-home stays and hospice - faces financial depletion in the second quarter of 2033, or one quarter earlier than projected last year. At the time of depletion, only 89% of benefits would be paid, according to the report released by the Social Security and Medicare trustees last week.

Total Medicare spending will nearly double as a share of the U.S. economy in the next 25 years. Social Security and Medicare trustees report

An automatic 11% cut to payments to hospitals, nursing homes and hospice providers would mark a first for the Medicare system and could lead to disruption in healthcare services, analysts said.

"It could be pretty messy. But exactly what it will look like, we don't know. We've never been through something like this before," said Matthew Fiedler, senior fellow at the Center on Health Policy at the Brookings Institution. "It's quite plausible it will affect access to care."

The reason the depletion date moved up is that there's assumed to be higher use of services as the population ages, Medicare Advantage per capita spending increases and revenues drop due to last year's GOP tax legislation known as the One Big Beautiful Bill Act and signed into law in July, according to a report by the Peter G. Peterson Foundation.

The Medicare trust fund is primarily financed by a 2.9% payroll tax, half of which is paid by the employer and the other half by the employee. The growth in spending is outpacing the program's income as the population ages and uses the healthcare system more, and as prices for healthcare rise.

The trustees report projects that costs for inpatient hospital services will grow at a rate of 4.8% annually over the next decade, while costs related to nursing homes, home health and hospice are projected to grow by 7%, 7.3% and 8.9%, respectively. That's due to the specific healthcare demands of an older population, which will require more of those services.

"Since Social Security is a defined cash benefit, people will know very much that their Social Security is reduced by a large amount. Whereas with Medicare, it's their health coverage, and they may not notice that their provider is getting a cut," said Juliette Cubanski, director of Medicare policy at health-policy organization KFF.

Another driver of costs is the continued shift of beneficiaries from traditional Medicare to the Medicare Advantage program, according to a report from the Bipartisan Policy Center. Although the shift to Medicare Advantage is slowing, more than half of all Medicare beneficiaries have Medicare Advantage, which is the private-pay alternative to traditional Medicare. Medicare Advantage costs the government more per subscriber than traditional Medicare.

Overall, the trustees project that total Medicare spending will nearly double as a share of the U.S. economy in the next 25 years, growing to 6.5% of gross domestic product by 2050, up from 3.9% in 2025.

If depletion hits and payouts get cut by 11%, hospitals and nursing homes could file lawsuits to compel the government to pay them and make them financially whole, Fiedler said.

"A lot of hospitals are under significant financial stress already," Fiedler said. "There are some hospitals that could keep their doors open, but how much care would they be able to provide to Medicare patients - it's unclear."

While outcry among advocacy groups has led to public awareness of the insolvency - and automatic benefit cuts of 22% - that Social Security faces in 2032, it's less well known that Medicare is heading toward a financial crisis, as well.

"We just don't know what will happen. Providers may pull back on services or stop seeing Medicare patients," Cubanski said. "The closer we get to that date, the urgency intensifies. Policymakers would likely take action."

There's no law that dictates how Congress should resolve the looming Medicare financial crisis. To avoid depletion of the trust fund, Congress has options such as raising the Medicare payroll tax, reducing spending by lowering the amount Medicare pays to hospitals and healthcare providers, or adjusting the benefits payable to Medicare beneficiaries.

People shouldn't expect a quick or clear resolution of the crisis anytime soon, according to experts.

"Congress will do something, but exactly what they will do is uncertain," Fiedler said. "When it's in the future and it's unclear, it tends not to rise to the top of the political agenda."

-Jessica Hall

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June 15, 2026 13:22 ET (17:22 GMT)

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