Medicare Finances: Findings of the 2014 Trustees Report

July 2014 ~ Health Policy Brief No.  11

Updated July 29, 2014

Summary:  Medicare is the federal health insurance program for Americans age 65 and older and younger adults with disabilities. Medicare’s finances are managed through two trust funds: the Hospital Insurance (HI) Trust Fund (which pays for Part A benefits) and the Supplementary Medical Insurance (SMI) Trust Fund (which pays for Part B and Part D benefits). Each year, the Medicare Trustees give a detailed account of the expected condition of the program’s two trust funds over both the short and long terms.

According to the 2014 Medicare Trustees Report, expenditures from Medicare’s HI Trust Fund exceeded revenues by $15 billion in 2013. Without a policy change aimed at increasing revenues or reducing expenditures, the surplus that has accumulated in the HI Trust Fund over the years will be depleted by 2030; after that, the HI Trust Fund will have to rely on the annual revenue from Medicare payroll taxes and to a lesser extent, its other sources of income, which together are projected to cover 85 percent of annual expenditures in 2030. The solvency of the HI Trust Fund is separate and apart from the program’s impact on the federal budget and the continued affordability of beneficiary cost-sharing.

This year’s Trustees Report reflects improvements in Medicare’s financial outlook. The projected solvency date for the HI Trust Fund is four years later than what last year’s report projected. The 75-year actuarial deficit for the HI Trust Fund has decreased from 1.11 percent to 0.87 percent of taxable payroll.