This week’s newsletter is Sponsored By: Medicare Market Insights +
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Here is what you’ll find in this week’s newsletter!
Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.
Deep Dive 📚 - 2026 Trustees Report - What Is the Outlook for Medicare?
Sponsor Snapshot 🚀 - brought to you by Medicare Market Insights +
It’s only a 5 minute read, but it will make you 10x smarter.
Here are IMPORTANT LINKS 🔗 for the week:
Modeling the financial effects of an out-of-pocket cap for Traditional Medicare beneficiaries - (link)
Democrats To Propose Bill Capping Out-of-Pocket Medicare Costs for Enrollees - (link)
100 Long Island retirees caught ‘double-dipping’ on Medicare, costing taxpayers $1.6M: audit - (link)
Decoding Medicare Advantage Coding Intensity - (link)
Medicare Will Spend More Than $13 Billion on the Medicare Advantage Quality Bonus Program in 2026 - (link)
Democrats Introduce Saving MEDICARE Act to Stop Insurers’ Profiteering Off Medicare - (link)
[Updated] CMS Proposes 2.4% Home Health Medicare Payment Increase For 2027 - (link)
CMS wants power to remove ‘problematic’ physicians, ASCs from Medicare - (link)
Jared’s recent LinkedIn posts:
DEEP DIVE 📚
2026 Trustees Report — What Is the Outlook for Medicare?
Introduction
The Medicare Board of Trustees was created to oversee the financial operations of both the Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds.
Hospital Insurance (HI) = Medicare Part A
Supplementary Medical Insurance (SMI) = Medicare Part B and Prescription Drug Coverage/Part D
Each year, the Medicare Board of Trustees submits an annual report (prepared by the Office of the Actuary within CMS) to Congress. This report provides analysis regarding the status and outlook for each of the trust funds.
If you are interested in a more detailed overview of the Medicare Trustees Report, check out this previously published Medicare Market Insights (MMI) overview.
As in prior reports, this year’s version isn’t rife with optimism. For the 9th year in a row, this year’s Medicare Trustees Report contains a Medicare funding warning.
Let’s take a closer look at this year’s report and see what that means.
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2025 Statistics
The following results were reported in the 2026 Medicare Trustees Report:
69.3 million Medicare enrollees (62.2 million aged 65+ and 7.1 million disabled)
Approximately 51% enrolled in Medicare Advantage
Total Medicare income $1,226.2 billion, Total Medicare expenditures $1,210.1 billion. Net surplus $16.1 billion.
Total HI income $462.4 billion, Total HI expenditures $444.2 billion of expenditures. Net surplus $18.2 billion. Assets in the trust fund at the end of 2025 were $255.7 billion.
Total SMI income $763.8 billion, Total SMI expenditures $765.8 billion. Net deficit $2.1 billion. Assets in the trust fund at the end of 2025 were $168.4 billion.
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Analysis
Hospital Insurance (HI) – Medicare Part A
Medicare Part A is funded through payroll taxes and investment income earned on investments held within the HI trust fund, which operates as a financial reserve for the Part A program.
The HI trust fund projects to deplete in the quarter two of 2033, which is a quarter earlier than projected in the 2025 report (CMS, 2025).
When the trust fund depletes in 2033, the tax income will be adequate to cover 89% of scheduled benefits, which will increase to 93% by 2100 (CMS, 2026).
The comparison of the beginning of the year trust fund reserves and expected cost of the program during the year is known as the “annual trust fund ratio” (CMS, 2026). The HI ratio currently sits at 53% and declines until depletion in 2033 (CMS, 2026).
This year’s report indicates that HI tax revenue (and other non-interest revenue) will be less than expenditures starting in 2027 (CMS, 2026).
The following graph from the 2026 Medicare Trustees Report shows the ratio going back to 1990:
To give readers a sense of the magnitude of the solvency issue, the 2026 Medicare Trustees Report indicates that one of the following changes would be necessary to ensure HI program solvency through the year 2100 projection period:
Increase payroll tax rate from 2.9% to 3.46% beginning in January 2026; or
Reduce Medicare Part A benefits by 12% for all current and future beneficiaries beginning in January 2026.
Supplementary Medical Insurance (SMI) – Medicare Part B and Part D
Medicare Part B is funded through general taxes, beneficiary premiums, and investment income earned on investments held within the SMI trust fund, which operates as a financial reserve. In addition to these funding sources, Part D revenue is also generated from states with dual-eligible beneficiaries (Medicare and Medicaid).
The SMI trust fund is anticipated to be adequately funded for the foreseeable future as the main funding through general taxes and beneficiary premiums is adjusted automatically every year to cover annual costs (Treasury, 2026).
However, it is not all favorable news as it relates to the SMI trust fund. The following table (CMS, 2026) expresses the expected program expenditures as a percentage of Gross Domestic Product (GDP):
Year | Part B | Part D |
|---|---|---|
2025 | 1.90% | 0.59% |
2035 | 2.90% | 0.76% |
2100 | 4.48% | 1.01% |
This means that to keep up with the increased expenditures, additional revenue is going to be required from some combination of increased tax contributions or increases to the Part B premiums paid by beneficiaries.
The following chart from the 2026 Medicare Trustees report displays Medicare expenditures as a % of GDP:
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Medicare Funding Warning and Unfunded Obligation
For the 9th year in a row, the report issues a Medicare funding warning, which is triggered when there are two consecutive years of a “determination of projected excess general revenue Medicare funding” (CMS, 2026).
This determination occurs when general tax revenues utilized by the program exceed 45% of expenditures at any point during the next 7 years (CMS, 2026). Unfortunately, this 45% threshold is anticipated to be exceeded in fiscal year 2026, the first year of the 2026 report’s projection (CMS, 2026).
As a result of this warning, the following need to occur:
“The President to submit to Congress proposed legislation to respond to the warning within 15 days after the Fiscal Year 2028 budget submission; and
Congress to consider the legislation on an expedited basis.” (CMS, 2026)
The 2026 Medicare Trustees Report defines the unfunded obligation as “the cumulative present value of scheduled income less cost”. When representing this value on a present dollar basis across the next 75 years as of 1/1/2026, the HI unfunded obligation is $4.2 trillion or 0.2% of GDP while it is $0 for SMI.
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Additional Statistics
The 2026 Medicare Trustees Report including the following notable stats:
Part B expenditures for skin substitutes were $0.8 billion in 2021 and increased to $14.1 billion. Due to policy changes beginning in 2026, it is anticipated that spending will decline by over 90%, netting saving approaching $13 billion.
As a percentage of federal income taxes (personal and corporate), the SMI government percentage was 0.8% in 1970, which grew to 17.6% in 2025. It is estimated to surpass 38% by 2090.
The standard monthly Part B premium rate was $4.00 in 1970 and swelled to $202.90 for 2026. In 2035, the standard monthly Part B premium is currently estimated at $360.60.
The annual Part B deductible was $50 in 1970 and has increased to $283 in 2026. It is currently projected to be $503 in 2035.
In 1970, the per capita Part B benefit was $101, and it is projected at $9,555 for 2026.
HI expenditures represented 0.51% of GDP in 1970 and grew to 1.45% in 2025. By 2040, this value is expected to exceed 2%.
The annual inpatient hospital deductible was $52 in 1970 and has increased to $1,736 in 2026. It is currently projected to be $2,296 in 2035.
As noted earlier, there were approximately 69.3 million Medicare enrollees in 2025 with ~51% in Medicare Advantage plans. By 2045, there are going to be a projected 83.6 million Medicare beneficiaries with an estimated 57% enrolled in Medicare Advantage. By 2080, it is projected that over 100 million beneficiaries will be enrolled in Medicare.
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Closing
The warning signs around the Medicare program are all flashing red and significant changes are needed soon to ensure its long-term stability.
In the 2026 Medicare Trustees Report, the Trustees “recommend that Congress and the executive branch work closely together to quickly address these challenges”. However, given the ramifications to future generations, these challenges need to be treated as more than a political football.
These challenges require input from all parties involved – government, providers, insurance carriers, beneficiaries, and agents. If all these parties do not have a seat at the table, the solution to these challenges could be inconsistent or detrimental to certain participants.
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References
Centers for Medicare & Medicaid Services (CMS). (2026). 2026 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. https://www.cms.gov/oact/tr/2026
U.S. Department of the Treasury (Treasury). (2026). Social Security and Medicare Trustees Reports: Fact Sheet. https://home.treasury.gov/system/files/136/2026-Message-to-the-Public.pdf
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What MMI + Subscribers read this week…
Insurance Regulatory Insights July 2026 - (link)
June ‘26 MA/MAPD and PDP enrollment data - April enrollment data has been loaded. Here are a few observations. (link)
The Little Guys Are Winning: Smaller and Regional MA Plans Drive Post-AEP Growth - 2026 enrollment data proves it's a trend, not a blip (link)
Non-Commissionable Plans - 2026 - Repository of 2026 Non-Commissionable Plans (link)
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