Costs & IRMAA
Medicare's Hospital Trust Fund Is Now Projected to Run Short One Quarter Sooner, Partly Because of the 2025 Reconciliation Law
The 2026 Medicare Trustees Report moved the projected depletion date for the Part A trust fund to the second quarter of 2033. Lower payroll tax revenue projections tied to H.R. 1, the 2025 federal budget reconciliation bill, are among the causes.
By the Goodsurance editorial teamAugust 25, 2026
The Medicare Part A trust fund, which pays for inpatient hospital care, skilled nursing facility stays following a hospital admission, home health services, and hospice care, is now projected to be depleted about three months earlier than estimated a year ago, according to the 2026 Medicare Trustees Report released June 9, 2026.
Trustees moved the expected exhaustion date from the third quarter to the second quarter of 2033. While the shift amounts to one quarter, it reinforces the fund's structural funding gap and the urgency of a long-term solution.
Medicare's Part A hospital fund is now set to run low in early 2033, three months sooner than last year's estimate.
A KFF analysis of the report found that the primary driver of the revised estimate is lower projected Social Security payroll tax revenue, which is one of the main sources of Part A funding. Those projections fell partly because of changes in revenue expectations following enactment of H.R. 1, the 2025 budget reconciliation bill.
Trust fund depletion would not mean Medicare immediately stops paying hospital and nursing home claims. If reserves run out, the program would only be able to pay claims at the level supported by incoming payroll taxes at that time, estimated to cover approximately 89 to 91 percent of projected Part A costs. Avoiding that outcome would require action by Congress, such as increased revenues, reduced payments to providers, or changes to benefits.
The Trustees also projected significant growth in Medicare Part D spending, with drug program outlays expected to rise from about 181 billion dollars in 2025 to roughly 346 billion dollars in 2035, driven largely by greater use of GLP-1 medications and other high-cost specialty drugs.
In plain words
Medicare Part A pays for hospital stays, nursing home care after a hospital stay, home health visits, and hospice. It is mostly funded by payroll taxes that workers and employers pay.
In June 2026, the government officials who track Medicare's finances said the Part A fund is expected to run out of reserve money in early 2033, about three months sooner than they thought last year. One reason is that a new federal spending law from 2025 is expected to bring in less payroll tax money than earlier estimates assumed.
If the fund runs dry, Medicare would not stop paying automatically, but the program could only cover about 89 to 91 cents of every dollar owed without Congress stepping in.
The same report also found that the Medicare drug program is growing fast. Drug spending is expected to nearly double from about 181 billion dollars in 2025 to about 346 billion dollars in 2035, mostly because of expensive new medicines.
Understand the basics first
Source: KFF
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