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On June 9, 2026, the Medicare Board of Trustees released its annual report on the financial status of the Medicare funds. According to the report, total income for the Medicare program in 2025 amounted to about $1,226 billion. In 2025, total annual Medicare expenditures were about $1.2 trillion, up from the prior year’s total of $1,122 billion. This growth is mainly due to lower birth rates and immigration, higher projected costs of Medicare Advantage plans and certain provider payments, and the enactment of the One Big Beautiful Bill Act (OBBBA).

The 2025 Medicare expenditures amounted to about 4.0% of Gross Domestic Product (GDP), and are expected to grow to 6.7% of GDP by 2099. The report warns that Medicare expenditures are projected to increase in future years at a faster rate than either aggregate workers’ earnings or the overall economy. 

The Medicare program consists of two component programs for the elderly and disabled: Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). The HI program (Medicare Part A) pays primarily for inpatient hospital care and is financed by a payroll tax of 1.45% of taxable earnings. The SMI program consists of Medicare Parts B and D. Medicare Part B is a voluntary program that pays for physician, outpatient hospital, home health, and other services. Medicare Part D is a voluntary program providing access to outpatient prescription drug benefits. Approximately one-quarter of the SMI program is financed by beneficiary premiums, with the remainder financed by transfers from the U.S. Treasury’s general fund.   

According to the Medicare Trustees’ 2026 report, the long-term financial status of the HI Trust Fund has worsened with a 0.14% increase in the actuarial deficit of 0.56% of taxable payroll, compared to 0.42% in last year’s report. The HI Trust Fund is projected to be insolvent in 2033 (one quarter earlier than last year’s projection) and total spending in 2099 is projected to increase by 13% (0.8% of GDP) compared to previous baseline estimates. 

The financial outlook for the SMI program is better than the HI program. Under current law, each account within SMI is automatically in financial balance. For both Medicare Parts B and D, revenues are projected to equal expenditures for all future years, but only because beneficiary premiums and general revenue transfers must, by statute, be increased to meet expected costs for each year. However, the rapid growth of health care costs is expected to greatly accelerate the need to finance these benefits. 

The report indicates that the projections show that change is needed to address Medicare’s financial challenges. The Trustees continue to recommend that Congress and the executive branch work closely together to quickly address these challenges.   

The report is available here.