Medicare is a federal health insurance program in the United States primarily designed for people aged 65 and older, though it also covers certain younger individuals with disabilities or specific health conditions. The program provides coverage to over 63 million Americans and has faced increased financial challenges due to increasing medical care expenses and an aging population.
Current state of Medicare
There are recent concerns about Medicare’s solvency and its ability to fully fund benefits for future beneficiaries without substantial reforms or increased funding. Medicare expenditures in 2023 totaled $1,014.6 billion. Medicare is funded primarily through two trust funds:
- The Hospital Insurance (HI) Trust Fund, which pays for Medicare Part A services (hospital stays, skilled nursing care, etc.), is primarily funded through payroll taxes on earnings (1.45% from employees and employers, with an additional 0.9% tax on higher income earners). The HI trust fund also pays for Medicare administrative costs. Their total 2023 expenditure amounted to over $403 billion.
- The Supplementary Medical Insurance (SMI) Trust Fund, which covers Part B (outpatient care) and Part D (prescription drugs), is funded through premiums paid by beneficiaries and general revenue from the federal government.
As of 2023, the HI Trust Fund is projected to be insolvent by 2031 according to the Medicare Trustees Report. This means that, without changes, the fund will only be able to pay about 90% of Part A benefits after that year, primarily relying on the ongoing payroll taxes. This raises concerns about how to balance Medicare’s spending with available revenues, especially as healthcare costs and the aging population continue to grow.
Trump’s plans for Medicare
During President Trump’s previous presidency, he had pledged to make Medicare more sustainable and increase its longevity. However, Trump has previously stated that he supports repealing the Affordable Care Act (ACA) which could severely impact Medicare’s longevity. His recent presidential win as the 47th president of the United States has had citizens asking what his plans for Medicare are set to be.
Trump has said that he does not intend to cut benefits but is intending on addressing the longevity of Medicare. “I will fight for and protect Social Security and Medicare. There will be no cuts, and we won’t be raising the age, like they’re going to end up doing,” Trump said. Medicare is expected to go through much needed reforms if it is nit to be depleted in the next decade.
Medicare needs immediate reforms
Medicare remains an essential program for millions of Americans, but its long-term financial stability is increasingly at risk due to rising costs, an aging population, and insufficient revenue to cover future expenditures. While immediate solutions such as increasing taxes, adjusting eligibility, and reducing spending on certain services may help, a comprehensive approach is needed to ensure that the program can continue to function effectively in the years to come. The challenge lies in balancing the program’s sustainability with the needs of a growing and aging population.
Medicare is not the only government program which is in need of reforms. Social Security funds are also expected to be depleted by 2035 with experts agreeing that taxes need to be raised or benefits need to be cut in order to extend the longevity of the funds. As more Baby Boomers retire and live longer, the number of people receiving benefits will increase, while the workforce contributing payroll taxes to fund these programs continues to shrink.
Ultimately, Trump’s legacy on Medicare and Social Security was one of uncertainty. While he repeatedly vowed not to cut benefits, his tax policies and attempts to cut government spending on healthcare programs put additional strain on the federal budget. The long-term impacts of his administration’s fiscal policies are still being felt, as Medicare’s solvency and Social Security’s financial health remain key concerns for policymakers moving forward. It continues to remain uncertain how his second term in office will impact these programs.
