In less than a year, Trump erased 12 years of solvency for the trust fund that pays for Medicare Part A
By: Nick Lichtenberg (Fortune via Yahoo Finance)
Another win?
S E E D E D C O N T E N T
February 23, 2026
Recent policy changes and economic shifts have slashed 12 years off the projected life span of the trust fund that pays for Medicare Part A, according to a newly updated report from the Congressional Budget Office (CBO). The Hospital Insurance (HI) Trust Fund is now slated to be entirely exhausted by 2040, even though the balance generally increases through 2031, as spending will begin to outstrip income in the following year.
This rapid deterioration of Medicare's financial solvency represents a stark drop from the CBO's previous estimate, which was published just last year, in March 2025. The dramatically shortened timeline means future retirees could face significant cuts to vital health care services far sooner than previously anticipated. As required by the Deficit Control Act, CBO Director Phillip Swagel noted the projections reflect the assumption benefits would be paid as scheduled even after the HI trust fund was exhausted.
The primary culprit for this accelerated depletion is a sharp reduction in the fund's projected income, heavily driven by legislation passed over the last year. Specifically, the 2025 reconciliation act (Public Law 119-21, more commonly known as the One Big Beautiful Bill Act) significantly reduced the revenues the trust fund normally receives from taxing Social Security benefits. This legislation lowered tax rates and established a temporary deduction for taxpayers age 65 or older. Consequently, this major policy shift enacted during the Trump administration has directly contributed to starving the Medicare safety net of critical future funding.
What is the HI trust fund?
The HI trust fund is the financial backbone for Medicare Part A, which covers essential services including inpatient hospital care, stays in skilled nursing facilities, home health care, and hospice care. Over the next 30 years, the fund is expected to rely on the Medicare payroll tax for about three-quarters of its annual income, with another roughly one-eighth derived from income taxes on Social Security benefits.
However, the recent tax cuts are not the only factor draining the fund. The CBO also cited decreased projections for payroll tax revenues, warning it had to adjust their models to account for lower expected worker earnings. Furthermore, because the trust fund will have smaller balances going forward, it will generate less interest income, creating a compounding negative effect on its overall finances.
On the other side of the ledger, Medicare spending is rising faster than anticipated. The CBO noted per-enrollee spending in Medicare Part A's fee-for-service program in 2025, along with 2026 bids by Medicare Advantage plan providers, both came in higher than expected.
The consequences of the fund's exhaustion in 2040 would be severe for both seniors and health care providers. By law, if the trust fund runs dry and spending continues to exceed income, Medicare would be legally restricted to paying out only what it takes in. To make up the shortfall, total benefits would need to be slashed. The CBO estimates these benefit reductions would start at 8% in 2040 and steadily climb to a 10% cut by 2056. It currently remains unclear exactly how the Centers for Medicare & Medicaid Services would manage the program under such dire financial constraints.
Addressing this looming crisis will require significant legislative action. The fund currently faces a 25-year actuarial deficit of 0.30% of taxable payroll—a figure representing the total amount of earnings subject to the payroll tax. This deficit is 0.17 percentage points worse than last year's projection. To eliminate this deficit and restore the 12 years of solvency lost over the last 11 months, lawmakers will be forced to increase taxes, reduce health care payments, transfer money into the trust fund, or implement a combination of these politically fraught approaches.
Notably, these already grim baseline projections remain highly uncertain and do not yet account for the potential economic or budgetary fallout from the recent Supreme Court ruling on tariffs ( Learning Res., Inc. v. Trump , issued on February 20, 2026).
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Well correct me if I’m wrong but I think there has to be a better way of paying for this than taxing a tax. Don’t ya think? Some taxes are a necessary evil but taxing SS income is just evil IMO.
The private sector would call SoSec and Medicare investments. Why? Because the funds are returned to those making contributions.
So you are comfortable with the concept of taxing a tax? That is to say, taxing retirement income, to pay for retirement income?
They're not taxing a tax. They're taxing income.
Income which, BTW, usually exceeds the amount beneficiaries have paid in by a massive margin.
We tax 401(k) income also.
FICA is a tax. A payroll tax which funds SS. So yes, it’s a tax on a tax.
So you are comfortable with a tax on a tax?
It's a tax on the way into the Treasury. It's an expenditure on the way out.
Every single government employee is paid with money collected as a tax. Should they be exempt from taxes?
If a company receives revenue from government contracts, should that be tax exempt?
If a doctor treats a patient on Medicare, should that be tax exempt?
How far does this go, exactly?
In that case, wouldn't SoSec payments be considered a tax refund? When did tax refunds become tax exempt?
BTW, there are now a number of SoSec benefit recipients who have not paid FICA taxes. Should those benefits be tax exempt?
No.
Since always. It's a refund or your overpayment. That's not income.
Not completely analogous.
To my way of thinking a tax collected to fund retirement, should be tax exempt. Income tax, collected to fund government operations is different in my mind. There plenty of examples where taxes are taxed again but none so distasteful as a tax on tax collected for retirement.
I hear what you’re saying but disagree in that regard. So, you didn’t answer. Are okay with taxing a tax in that regard?
It's not just for retirement.
And it is tax exempt for people making less than $25k/yr or couples making less than $32k.
I don't have a problem with it at all. Only about half of recipients pay income tax on it anyway.
I think everyone living in the US should pay income tax, or nobody should pay it.
We all benefit from things like a strong military or interstate highways, and we should all be paying something toward those.
A tax refund on a tax intended to fund a retirement program? What?
Are they?
The question is not if those benefits should be tax exempt. The question is why those benefits are being paid in the first place.
Income tax is not a tax on a tax. And it’s definitely not a tax on a tax (FICA) intended to fund a retirement program like SS.
Regardless, i’m not talking about Income tax. Let’s stick to FICA.
Taxing SS income is abhorrent imo. A much better solution if more revenue is needed would be to raise the taxable maximum wage. Currently set around 185k. Folks are then hit only once during their earning years and not double dipped after they have retired.
Can’t really believe anyone actually likes the idea of getting taxed on retirement income.
Neither is what you're talking about.
Oh, so it is income after all.
Funny how it always seems like taxes are something somebody else should pay.
You're not getting double dipped. The average retiree gets 2-3 times more money in retirement than they paid it over their lives.
I think if you benefit from what the taxes pay for, you should have to pay them.
That's a fundamentally different discussion. No, there is not a requirement for a Social Security program. Just as there is no requirement for a Federal interstate highway system, a Federal aviation system, or a Federally subsidized banking system using FDIC and FSLIC programs. There is no requirement for military capability to fight a two front war. There is no requirement for tariffs.
If we are going to stick to what is required by the Constitution, the Postal Service is a requirement while protections for intellectual property are not required. Should we do away with patents, trademarks, and copyrights because they are not explicitly required?
Wrong and I can’t describe it in any simpler terms
Again, already explained. One is a tax on income that wasn’t specifically promulgated to raise revenue for SS, the tax on SS (FICA) is.
Not what this is. Again, already explained. One gets taxed only once during earning years. The other gets taxed once during earning years and a second time when retired. Not that difficult to follow.
You are missing the point. It’s not about how much but how it’s collected. And taxing SS income is a second dip. No doubt about it.
I think paying taxes on SS income is ridiculous. And please, stop trying to make this about not wanting to pay taxes. My comment isn’t even close to that
You brought it up. Not me. My comment has been clear. I think getting taxed again on SS income is extreme. And yeah, let’s not try to discuss how all taxes can be considered extreme. That horse left the barn long long ago.
Simple doesn't mean correct.
Yes. As we've discussed, money going into the treasury is tax. Money going out of it to you is not. You are not paying tax on tax, regardless of how many times you claim otherwise.
Second dip into what? What money is it that you imagine is being taxed twice?
You've said you think it's ridiculous. I respect your opinion on that, even though I disagree. It's not factually incorrect.
I don't mean to be picking on you personally about not paying taxes. I am assuming you're on SS, so if that's not the case I am happy to stand corrected.
If you are on SS, you've said in this conversation 1) that your SS shouldn't be taxed and 2) if they need more money they should tax somebody else. So you see how it those two together don't look great.
Yeah, this conversation has run its course. Later
There are 5 federal taxes on most people's pay checks. The Employer pays Medicare tax of 1.45% of the employee's pay and is unlimited and Social Security tax 6.2% of the employee's pay and is capped at $184,500 for 2026.
The Employee pays these same taxes out of their earnings.
In addition to the Medicare and Social Security the Employee pays Federal Income Tax based on their rate of earnings.
In theory the Medicare and Social Security are supposed to go into a Trust Fund for future payouts. When one reaches retirement age their Social Security Benefit is based on what they have paid into the Trust Fund. So being taxed on Social Security is a tax on a tax. However, this entire debate is regarding Medicare part A, which I don't believe you are taxed on when you use the benefit.
How is anyone being taxed again? President Reagan pushed for (and got) means testing of Social Security benefits. What you are calling a tax only applies above a level of additional income. It was a way to address unemployment by discouraging working in retirement. (The peak of the boomer generation was entering the labor force during Reagan's two terms. And there was a concerted push to encourage more women to work outside the home.)
If you want to talk about double taxation, wages earned by a retiree is still subject to FICA taxes. The wages are taxed for Social Security while also reducing Social Security benefits.
Trump has created a number of Doom Loops in the economy. And now we're even more vulnerable to international disruptions. Annexing Greenland won't save us now.
A box of Doom Loops for breakfast?
Cream of Bleak.
Trump has destroyed every business he's ever run.
Amazing!
Not every one but the list is long.
List numerically of Trump's failed businesses
The difference between Trump and most politicians is he has actually started and run businesses. The only business most politicians have operated, they didn’t start but do their best to run into the ground and enrich themselves on is, the US government.
According the Brookings Institute the 114th Congress had over 270 members that listed business or banking as a prior occupation. Many members of Congress have LLC's listing them as owners. Bert Guthrie of KY of got was awarded COVID Business loan relief of $4.3M.
Don't confuse him with facts, it will ruin the confirmation bias.
Amazing how many members of Congress voted for the PPP then forgave the loans TO THEMSELVES.
Businesses linked to members of Congress who opposed PPP transparency got PPP loans - CREW | Citizens for Responsibility and Ethics in Washington
BUSINESS PEOPLE, ALL REPUBLICANS...
One of the Congress critters from Arkansas is a banker. I don't know what the other 3 are. I should care, but I don't because they are all worthless. Just like our Senators and our entire state government
Speaking of Arkansas... I see that WI (where I currently live) finally expanded medicaid for moms (postpartum care for up to a year after birth) leaving Arkansas the only state in the country not to.
Yep. Good ol' Arkansas. Get pregnant and stay that way. Oh? You may die if you carry this fetus to term? Tough shit.
We have a 38 deaths per 100,000. This You Tube video gives more details
Wait! You were asking about postpartum care not maternal mortality.
Sarah !@#$abee doesn't care about real people. So what if you have postpartum depression? Suck it up, go to church, get down on your knees and pray it away! That's pretty much her attitude
Healthcare for women after giving birth, yes.
This reminds me of the story one of our members posted here a few years ago blaming a "spike" in maternal mortality on Roe vs Wade beig overturned. The article relied on mortality rate from 2021 to make its claim. Good Stuff.
We have a 38 deaths per 100,000.
The same as it was in 2022.
As long as the control is taken out of the hands of women, the pro birth crowd seems to find the loss acceptable.
Key words ….. prior occupation. That does not automatically equate to “Business Owner or Creator.
It doesn't make them ignorant of business and banking either.
You also seem to be skating right by the point that was made that Trump has failed more than he's succeeded... let's not talk about how he recently found guilty of fraud.
Labeling Trump (a billionaire by the way) an unsuccessful businessman is the king of all gaslighting specials but I understand. People who have never started/managed a successful business career which involves running a business or businesses will never get it. Never. I mean how could they? Having never done it they have no basis but observation and conjecture. Which is rarely better than actual experience.
This is my point. Most politicians don’t have a clue when it comes to to running a business. Well, maybe AOC does. She was a bartender after all and probably served a lot of business owners. Probably learned by osmosis that way eh?
Trump was broke and then he got lucky with the The Apprentice. There is a whole book about his luck in staying wealthy.
"Lucky Loser: How Donald Trump Squandered His Father's Fortune And Created The Illusion Of Success."
You complain about Trump. Meanwhile we are getting buttfuked daily by many in congress getting rich quick and you never have anything to say about that?
The triggering at play here is epic. Really epic.