Trump Policies Cut 12 Years From Medicare Part A Trust Fund Timeline, CBO Says

‎A newly revised report from the Congressional Budget Office reveals that Medicare’s Hospital Insurance trust fund has lost 12 years of projected financial stability in under a year. The fund that supports Medicare Part A is now expected to be depleted by 2040.

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‎Although balances are projected to rise through 2031, expenditures are forecast to exceed income beginning the following year. That imbalance sets the stage for complete exhaustion within less than two decades.

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‎CBO report shows Medicare Part A trust fund will run out by 2040 after policy changes cut 12 years of solvency, raising risk of benefit reductions.

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‎This marks a sharp reversal from the estimate issued in March 2025. The shortened timeline significantly advances the date when retirees could face cuts to essential health services. As required under the Deficit Control Act, CBO Director Phillip Swagel stated that projections assume benefits would continue as scheduled even after the trust fund is depleted.

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‎A major driver behind the faster decline is a steep drop in projected revenues. Legislative changes enacted over the past year played a central role. The 2025 reconciliation law, Public Law 119-21—widely known as the One Big Beautiful Bill Act—reduced income flowing into the fund from taxes on Social Security benefits. The measure lowered tax rates and created a temporary deduction for taxpayers aged 65 and older. These revisions have weakened a key funding stream supporting Medicare.

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‎The Hospital Insurance trust fund underpins Medicare Part A, which finances inpatient hospital services, skilled nursing facility stays, home health care, and hospice care. Over the next three decades, roughly three-quarters of its income is expected to come from payroll taxes, while about one-eighth is projected to come from income taxes applied to Social Security benefits.

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‎Revenue pressures extend beyond legislative tax cuts. The CBO reduced its payroll tax revenue projections after lowering expectations for worker earnings. With smaller balances anticipated in the years ahead, the fund will also earn less interest income, intensifying financial strain.

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‎At the same time, Medicare expenses are climbing more rapidly than forecast. Per-enrollee spending in the Part A fee-for-service program during 2025 exceeded earlier projections. Additionally, 2026 bids submitted by Medicare Advantage providers came in higher than anticipated.

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‎If the trust fund becomes insolvent in 2040, the consequences would be significant. Federal law restricts Medicare to disbursing only the revenue it collects once the fund is exhausted. To bridge the gap, benefit payments would have to be reduced. The CBO estimates cuts would begin at 8 percent in 2040 and gradually increase to 10 percent by 2056. How the Centers for Medicare & Medicaid Services would administer the program under those constraints remains uncertain.

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‎The trust fund currently faces a 25-year actuarial shortfall equal to 0.30 percent of taxable payroll—earnings subject to payroll taxation. That deficit is 0.17 percentage points worse than last year’s outlook. To close the gap and recover the lost years of solvency, lawmakers would need to raise taxes, reduce payments, transfer additional funds into the trust, or combine those approaches.

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‎These projections also carry notable uncertainty. They do not yet factor in possible economic or fiscal consequences stemming from the recent Supreme Court decision in Learning Resources, Inc. v. Trump, issued February 20, 2026.