The Hospital Insurance Trust Fund Is Projected To Deplete in 2031

Medicare's Hospital Insurance Trust Fund — the account that pays for inpatient hospital care, skilled nursing, hospice, and home health — is projected to run out of money in 2031 according to the 2024 Medicare Trustees Report. That does not mean Medicare stops working that year. It means the fund will no longer have a reserve to cover the difference between what it collects in payroll taxes and what it pays out in claims.

When the reserve depletes, the program will still collect payroll taxes from current workers. Those taxes will cover roughly 89 percent of costs. The remaining 11 percent of bills — about one in nine dollars — would go unpaid unless Congress acts. This is called the trust fund insolvency date.

The projection has shifted over time. In 2020, the Trustees estimated depletion in 2026. The date moved to 2031 because of lower-than-expected use during the pandemic and stronger-than-forecast payroll tax revenue. The date can shift again based on inflation, wage growth, healthcare costs, and mortality rates.

Key Takeaways

  • The Hospital Insurance Trust Fund is projected to deplete in 2031, meaning it will no longer have reserves to cover the gap between tax revenue and benefit payments.
  • After depletion, Medicare can still pay roughly 89 percent of hospital and related care costs from incoming payroll taxes, but the remaining 11 percent would require action from Congress.
  • The depletion date is an estimate based on current trends and changes annually; it has moved from 2026 to 2031 in recent years.
  • Congress has historically raised the payroll tax cap, increased premiums, or reduced payment rates to prevent or delay insolvency.
  • Supplemental insurance (Medigap) and Medicare Advantage plans are not affected by Hospital Insurance Trust Fund depletion because they operate separately.

What Happens on the Depletion Date

On the day the reserve reaches zero, Medicare does not shut down. Instead, the program enters a state where it can only pay claims using money coming in that day from payroll taxes. The Trustees estimate this covers about 89 cents of every dollar owed to hospitals and other providers.

The remaining 11 cents would not be paid unless Congress passes new legislation. In practice, this would likely mean hospitals and skilled nursing facilities receive partial payment — a reduction in reimbursement rates — or payment delays. Beneficiaries themselves would not see a direct cut to their benefits under current law, but providers might respond by limiting services, raising out-of-pocket costs, or reducing the number of Medicare patients they accept.

This scenario has never happened. Congress has always acted before or shortly after a trust fund depletion date to prevent it. The most recent major fix was in 1983, when payroll taxes were raised and the full retirement age was gradually increased.

Why the Trust Fund Depletes

The Hospital Insurance Trust Fund collects money from a 2.9 percent payroll tax split between employers and employees (1.45 percent each). Self-employed people pay the full 2.9 percent. This tax applies to all wages with no income cap.

The fund pays out for hospital stays, skilled nursing care after hospitalization, home health services, and hospice. As the population ages and medical costs rise, spending grows faster than payroll tax revenue. In 2023, the fund spent more than it collected for the first time since 1997. The gap widens each year.

Longer life expectancy means more people drawing benefits for longer. Inflation in healthcare costs — particularly for labor and technology — outpaces general wage growth. Fewer workers per beneficiary also narrows the tax base. In 1960, there were 5.1 workers per beneficiary. Today there are roughly 2.8, and that ratio continues to shrink.

How Congress Has Fixed This Before

Congress has several tools to prevent or delay insolvency. The most common are raising the payroll tax rate, increasing the income cap on which the tax applies, reducing payment rates to providers, or raising the age of may be able to access.

In 1983, the payroll tax was raised from 1.35 percent to 1.45 percent per worker. The full retirement age for Social Security was also gradually increased from 65 to 67, which indirectly affected Medicare because may be able to access is tied to age. In 1997, the Balanced Budget Act reduced hospital payment rates and introduced new payment models.

Congress could also combine approaches: a modest tax increase, a gradual increase to the may be able to access age, and targeted reductions in provider payments. Each option has different effects on workers, beneficiaries, and healthcare providers. No single fix has been adopted since 1983, and the longer Congress waits, the larger the adjustment needed.

What This Means for Your Current Benefits

If you are already receiving Medicare, the depletion date does not automatically change your benefits. You will still have Part A (hospital insurance) coverage. The question is whether providers will accept Medicare at the reduced reimbursement rate or whether they will limit services.

In practice, some hospitals and nursing facilities might tighten admissions, reduce staff, or shift costs to patients through higher copayments and deductibles. Others might continue serving Medicare patients at a loss, as many do today. The impact would vary by region and by facility.

If you are not yet on Medicare, the depletion date is a signal that Congress will likely need to act on the program's finances within the next few years. This could mean higher payroll taxes for workers, higher premiums for beneficiaries, or changes to may be able to access or benefits. The sooner Congress acts, the smaller the adjustment needed per person.

Supplemental and Advantage Plans Are Separate

Medigap (supplemental insurance) and Medicare Advantage plans operate independently of the Hospital Insurance Trust Fund. Medigap is sold by private insurers and covers costs that Original Medicare does not — copayments, coinsurance, and deductibles. If the Hospital Insurance Trust Fund depletes and providers receive partial payment, Medigap would cover the gap based on the policy terms.

Medicare Advantage plans are also run by private insurers under contract with Medicare. They receive a fixed payment from Medicare for each enrollee and then deliver benefits. If the Hospital Insurance Trust Fund depletes, Medicare's payment to Advantage plans might be reduced, which could affect the benefits those plans offer. However, the plans themselves do not depend on the trust fund in the way Original Medicare Part A does.

What You Can Do Now

There is no action you need to take today based on a 2031 projection. However, you can stay informed about Medicare's financial status by reading the annual Trustees Report, which is published in June. The report includes detailed projections and scenarios.

If you are working and paying Medicare taxes, understand that your payroll tax may increase if Congress acts to shore up the fund. If you are approaching Medicare age, consider how changes to may be able to access age or benefits might affect your retirement planning. If you are already on Medicare, review your coverage options — Original Medicare, Medigap, and Medicare Advantage — to understand how each would be affected by different Congressional responses.

You can also contact your elected representatives to express your views on how Medicare's finances should be addressed. Congress responds to constituent input, and the sooner the public engages on this issue, the more options remain available.

Frequently Asked Questions

Does Medicare Part B or Part D have a trust fund that could run out?

Part B (medical insurance) and Part D (prescription drug coverage) are funded differently. Part B is funded by general tax revenue and beneficiary premiums, with no separate trust fund. Part D is funded by beneficiary premiums, government subsidies, and manufacturer rebates. Neither has a depletion date the way Part A does, though both require ongoing Congressional funding decisions.

If the trust fund depletes, will I lose my Medicare coverage?

No. You will retain your Medicare Part A coverage. The question is whether providers will accept Medicare payment at the reduced rate. Most hospitals and nursing facilities will likely continue serving Medicare patients, though some may adjust services or costs. Congress has always acted before or shortly after a depletion date to prevent widespread payment failures.

Could Congress delay the depletion date by raising the payroll tax?

Yes. Raising the payroll tax rate or removing the income cap would increase revenue and extend the depletion date. A modest increase — for example, from 2.9 percent to 3.2 percent — would significantly delay insolvency. Congress could also combine a tax increase with other changes like higher premiums or slower payment growth to providers.

What if I am not yet 65 — should I worry about Medicare being there for me?

Medicare will be there, but the program's structure or your out-of-pocket costs may change. Congress has always acted to prevent complete insolvency. The longer you have until you turn 65, the more time Congress has to address the issue. If you are in your 50s or younger, changes are more likely to be gradual and phased in.

Where can I read the full Medicare Trustees Report?

The annual Medicare Trustees Report is published in June and is available free on the Centers for Medicare & Medicaid Services (CMS) website at cms.gov. The report includes detailed financial projections, historical data, and scenarios showing how different policy changes would affect the depletion date.