Medicare spending is projected to double over the next decade due to rising healthcare costs and increased enrollment, according to a new analysis from the nonpartisan Congressional Budget Office.
The CBO estimated in its annual Budget and Economic Outlook that the federal healthcare program for seniors will cost $1.1 trillion in 2026 as more baby boomers reach age 65. But by 2036, CBO estimates, Medicare coverage will cost the federal government $2 trillion, or more than 4% of projected gross domestic product.
More than 68 million seniors and people with certain disabilities have Medicare health insurance coverage, making Medicare the largest single purchaser of healthcare in the United States.
The number of people covered by Medicare Hospital Insurance, more commonly known as Medicare Part A, will reach 71.5 million in 2027 and increase to 80.5 million by 2036, the CBO said.
On top of adding more people to the program, costs for each enrollee are expected to increase by at least 5% each year as healthcare costs continue to rise.
But without legislative changes, the Medicare trust fund is likely to go broke before 2036.
Last year, the annual Medicare Trustees Report projected that the trust fund for Medicare Part A would be insolvent by 2033, three years earlier than initially anticipated.
Once the trust fund is depleted, Medicare would only be able to cover 89% of costs for patients’ hospital visits, hospice care, or home health services that follow hospital visits.
The increased strain on the Medicare trust fund is not only due to the rising number of enrollees but also because of lower birth rates and slower growth in the working-age population that funds the program through payroll taxes.
Because payroll taxes on covered earnings provide the main funding for Medicare Part A, legislation would be needed to increase tax rates to match increasing expenses for the program as the workforce continues to decline.
Although Republicans last year in the One Big Beautiful Bill Act curbed spending growth for Medicaid, the joint federal and state-funded insurance program for low-income Americans, sweeping changes to Medicare have largely been off the table.
MEANINGFUL STEPS ON MEDICARE REFORM
President Donald Trump promised on the 2024 campaign trail that he would not make any cuts to Medicare or Social Security or raise the retirement age from 65.
Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz has said on multiple occasions that Trump’s Make America Healthy Again movement aims not only to decrease healthcare spending but also to boost the health of the overall population to delay retirement.
