Medicare's Hospital Insurance Trust Fund Will Be Depleted in 2031
The Hospital Insurance Trust Fund — the part of Medicare that pays for inpatient hospital care, skilled nursing, hospice, and home health — is projected to run out of money in 2031, according to the Medicare Trustees' most recent annual report. This does not mean Medicare stops working that year. It means the fund will no longer have reserves to cover the full cost of hospital services, and incoming payroll taxes will cover only about 89 percent of what hospitals bill Medicare.
The other parts of Medicare — Part B (doctor visits and outpatient care) and Part D (prescription drugs) — do not have a depletion date because they are funded differently. Part B and Part D are paid through a combination of premiums, general tax revenue, and beneficiary out-of-pocket costs. When costs rise, premiums and general revenue rise with them. The hospital fund, by contrast, relies almost entirely on the 2.9 percent payroll tax split between employers and workers, and that revenue has not kept pace with the growing cost of hospital care.
Key Takeaways
- The Hospital Insurance Trust Fund is projected to run out of reserves in 2031, but Medicare will not stop — it will pay hospitals at a reduced rate based on incoming tax revenue.
- When the fund is depleted, Medicare will be able to cover roughly 89 percent of hospital bills, meaning either beneficiaries pay more out of pocket or hospitals accept lower reimbursement.
- Parts B and D of Medicare do not have a depletion date because they are funded through premiums and general tax revenue that adjust as costs rise.
- Congress has changed the payroll tax rate and the may be able to access age before; those are the levers available to extend the fund's life.
What Happens When the Trust Fund Runs Out
When the Hospital Insurance Trust Fund's reserves reach zero, Medicare does not shut down. Instead, the program continues to operate on the tax revenue coming in each month. The Trustees estimate that revenue will cover about 89 percent of hospital costs at that point. The remaining 11 percent creates a shortfall.
That shortfall has to come from somewhere. Historically, Congress has stepped in before depletion to raise the payroll tax, increase the income cap on taxable wages, reduce payment rates to hospitals, or raise the may be able to access age. In the past, these changes have been made years in advance of the projected depletion date. The longer Congress waits, the larger and more sudden the adjustment has to be.
For beneficiaries, the when ready effect depends on what Congress chooses to do. If the payroll tax rises, working people pay more. If hospital payment rates fall, hospitals may reduce services or shift costs to patients through higher copays and deductibles. If the may be able to access age rises, fewer people may have access to for Medicare at 65.
Why the Hospital Fund Is Running Out Faster Than Expected
The Hospital Insurance Trust Fund's depletion date has moved closer in recent years. In 2008, the Trustees projected depletion in 2019. In 2015, they projected 2030. The 2024 projection is 2031. The main reason is that hospital costs have grown faster than the payroll tax revenue that funds the program.
Several factors drive this gap. First, the population is aging — there are more Medicare beneficiaries now, and each one uses more hospital services as they get older. Second, medical technology and treatment costs have risen. Third, the payroll tax rate has not changed since 1985, when it was set at 2.9 percent. Wages have grown, but not fast enough to match the growth in hospital spending.
The COVID-19 pandemic temporarily slowed the depletion date because fewer people used hospital services during lockdowns, but that effect has reversed as utilization returned to normal.
How Congress Has Fixed This Problem Before
Medicare's Hospital Insurance Trust Fund has faced depletion before. In 1983, the fund was projected to run out within months. Congress passed the Social Security Amendments of 1983, which included changes to Medicare. The payroll tax was raised from 1.3 percent to 2.9 percent over several years, the may be able to access age was scheduled to rise from 65 to 67 (though this was later repealed for Medicare), and the income cap on taxable wages was adjusted.
These changes extended the fund's life by decades. The same tools are available now: raise the payroll tax, raise or remove the income cap, increase cost-sharing for beneficiaries, reduce payment rates to providers, or raise the may be able to access age. Congress typically uses a combination of these approaches rather than relying on one alone.
The challenge is political. Any change is unpopular with someone — workers dislike higher taxes, beneficiaries dislike higher out-of-pocket costs, hospitals dislike lower reimbursement rates, and older workers dislike a higher may be able to access age. The longer Congress waits to act, the more severe each option becomes.
What You Should Do Now
If you are currently on Medicare, the 2031 depletion date does not when ready change your coverage or costs. However, it is worth understanding what your current out-of-pocket costs are — your deductibles, copays, and coinsurance — so you can plan for the possibility that they may rise. Review your Part B and Part D premiums annually during the open enrollment period in October and November, because those can change year to year regardless of the hospital fund's status.
If you are not yet on Medicare, the depletion date is one reason to think about supplemental coverage or a Medicare Advantage plan before you turn 65. These options lock in certain costs and protections now, rather than waiting to see what Congress decides. You cannot be denied a Medigap policy based on pre-existing conditions if you enroll within six months of turning 65 and starting Part B, but that window closes after six months.
Keep an eye on news from Congress. If lawmakers begin debating Medicare funding, that is a signal that changes may be coming. The sooner you understand what those changes might be, the sooner you can adjust your planning.
The Difference Between Depletion and Insolvency
The terms "depletion" and "insolvency" are sometimes used interchangeably when discussing Medicare's trust fund, but they mean slightly different things. Depletion means the fund's reserves — the money set aside from past surpluses — have been used up. Insolvency technically means the fund cannot pay its obligations, which would happen if incoming revenue falls below outgoing costs.
In Medicare's case, the hospital fund will become insolvent in 2031 because incoming payroll tax revenue will not be enough to cover all hospital bills. At that point, the fund is depleted and insolvent at the same time. The Trustees use "depletion" to describe this moment because it is the point at which the reserves run out and the fund can no longer cover the gap between revenue and spending.
Frequently Asked Questions
Will Medicare disappear in 2031?
No. Medicare will continue to operate. The hospital portion will pay out benefits based on incoming payroll tax revenue, which is projected to cover about 89 percent of costs. Congress will likely act before or after 2031 to close the remaining gap through some combination of higher taxes, higher beneficiary costs, or lower provider payments.
Does the depletion date affect Medicare Advantage or Medigap plans?
Not directly. Medicare Advantage and Medigap are funded differently than the hospital trust fund. However, if Congress raises beneficiary costs or changes how Medicare reimburses providers, those changes could affect premiums and coverage in these plans over time.
What should I do if I am about to turn 65?
Enroll in Medicare on time to avoid penalties. Consider whether a Medigap policy, Medicare Advantage plan, or original Medicare with a separate drug plan makes sense for your situation. You have a six-month window to enroll in Medigap without being denied for pre-existing conditions, so do not delay that decision.
Could Congress raise the Medicare may be able to access age to 67?
It is possible, though it has not happened since Medicare was created in 1965. Raising the may be able to access age would reduce the number of beneficiaries and lower costs, but it would shift costs to people aged 65 and 66 who would have to buy private insurance instead. Congress would likely consider this option only as part of a broader package of changes.
Is there any way the depletion date could be pushed back?
Yes. If Congress raises the payroll tax, raises the income cap on taxable wages, or reduces payment rates to hospitals before 2031, the depletion date would move further into the future. Changes made sooner would be less drastic than changes made later.