Official Washington, D.C., just got another early warning. The Congressional Budget Office recently confirmed the Medicare trustees’ 2020 report that the Medicare trust fund – the Part A account that funds the hospitalization and related services – faces insolvency in 2026.
Insolvency means that Medicare wouldn’t be able to fully reimburse hospitals, nursing homes and home health agencies for promised benefits. In 2026, Medicare payments would be immediately cut by 10%, and the payment cuts would continue each year thereafter.
Medicare patients would be hit hard. You cannot cut provider payments for medical services without impacting the beneficiaries.
The COVID-19 pandemic briefly highlighted Medicare’s vulnerability to economic setbacks when CBO last September projected trust fund insolvency even earlier: 2024. Statewide lockdowns shocked the economy, spiking widespread business closures and driving high unemployment. These disruptions reduced Medicare’s job-based federal payroll taxes, threatening insolvency earlier than anticipated.
Washington policymakers cannot escape responsibility for what will happen to the program, its beneficiaries or the taxpayers.