Is Medicare Going Bankrupt?

Will My Medicare Last?

On a weekly basis, clients ask me about the solvency of Medicare. No, they don’t use the word “solvency,” or even words like “bankrupt,” but clients do regularly ask me my informed opinion on how long Medicare will be around—at least in the form we know it now.

But, before I reveal how I answer that continuous question, I want to show you why I answer as I do. In other words, let’s look at some factual evidence of the state of Medicare now, so we can project toward the future. But before we do, let’s do a primer on how Medicare works.

How Does Medicare Work?

Medicare Part A covers hospitalization, hospice, home health care following hospital stays, and skilled nursing facilities. The primary financing mechanism for Part A Medicare is FICA taxes, money withheld from the paychecks of current workers.

On the other hand, Medicare Part B covers doctor charges (both outpatient and inpatient charges), outpatient hospital, labs, tests, x-rays, MRIs, durable medical equipment, home health, and ambulance. Part B Medicare has a premium (currently $121.80 for new Medicare recipients, $104.90 for people on Medicare prior to 2016) and is also funded by a trust fund in which money is automatically transferred from the general fund. Therefore, as currently structured, Medicare Part B cannot go broke, though it could use an increasingly greater part of the general fund.

Medicare Part C refers to Advantage Plans, a private insurance alternative to Original Medicare. It has no trust fund.

Finally, there is Medicare Part D prescription drug plans offered by private insurance companies but regulated by Medicare. Part D plans are financed by premium payments, cost sharing by those insured by the plans, and the Medicare Part B trust fund.

Now that we have a basic understanding of Medicare, let’s look at the facts to answer the question: Is Medicare going bankrupt?

Medicare Costs and Waste, Fraud, & Abuse

We first need to understand that Medicare will likely remain solvent through 2028. That means that, over the next twelve, or so, years, Medicare will be able to pay all of its projected bills for hospital coverage. That’s good, as it is the hospital costs (Part A Medicare coverage) that are the most expensive charges for Medicare. However, after that point, Medicare cost projections have deficits topping $200 billion in a hurry. These are attributed, not only to rising health costs, but also waste, fraud, and abuse of $60 billion annually.

Adding to these concerning figures, in 2026, expenditures will exceed revenues, which means more Medicare money will be spent than will be taken in. Furthermore, the trust fund that covers Medicare expenditures will be at zero by that same year.

The 2016 Medicare trustees’ report stated that the Medicare cost growth-rate per Medicare beneficiary (an individual on Medicare) remains low. Per enrollee spending has remained at 1.4% per Medicare recipient; however, Medicare Part D expenditures are estimated to increase by 5.8% per Medicare recipient through 2025. In addition, remember what we discovered regarding Medicare waste, fraud, and abuse: It is eating at Medicare at an alarming rate! Adding to this concern is the fact that Medicare spending is a growing share of the federal budget.

Medicare & Bankruptcy?

This means that there is no question Medicare funding needs to be addressed by Congress. But is Medicare facing bankruptcy? Not even close.

What This Means for Medicare Recipients

So what does this mean for current Medicare recipients? Undoubtedly, Medicare beneficiaries will be facing higher cost-sharing measures. The Medicare Part B premium will rise, and Medicare Part A and B deductibles and copays will increase, driving up costs for Medicare Supplements and Medicare Advantage Plans. But current Medicare recipients will not have to worry that their Medicare will disappear.

So, what about future Medicare beneficiaries? This depends on how soon they enroll on Medicare. It is doubtful that Congress will ever eliminate Medicare, but the next generation will likely experience Medicare in a different way than current beneficiaries “enjoy,” such as higher costs, greater cost-sharing shares, and “innovative” supplemental options.

Rest Assured

But at least for now, Medicare continues to function, and current Medicare recipients can rest assured their Medicare benefits are not going away any time soon.

Don McCartyDon McCarty
00:36 07 May 24
Very helpful, friendly, and knowledgeable. Plan pricing was accurate, and I was kept informed throughout the process.
Susan BleuerSusan Bleuer
11:28 02 May 24
John Claeys is a great insurance agent. He is very pleasant and professional to work with and will get you the best insurance at the lowest price. He is quick to return phone calls and resolve issues. We highly recommend him for your insurance needs.
Rick RogersRick Rogers
16:14 01 May 24
If if spent a week studying the options for Medicare and all of the choices that go along with it, I’m sure that I would still be uncertain about what to do. John does a great job of explaining all of the options, including the advantages and disadvantages of each. I recommend him highly without any reservations.
Shari BrockShari Brock
22:12 18 Apr 24
John sat down with both of us and explained everything and answered any questions we had. He researched for the best plans for us. Highly recommend!!
Eric GuvernatorEric Guvernator
03:16 16 Apr 24
With all the endless solicitations I had received as I approached my 65th birthday, I had never expected to feel so comfortable and relieved to have John guide me seamlessly through the process. I couldn’t have asked for a finer experience. Not really having a clue going into our meeting, I left having confidence that I was gifted with the perfect plan as well as an advocate in my corner.I continue to get timely explanations and guidance anytime I send a question on Medicare material.If like me you are approaching this monumental deadline, contact John and let him handle this important process. You will not be disappointed.
Judi CarrollJudi Carroll
23:28 15 Apr 24
John answered all my questions and found me a great plan at an affordable premium.
Lynn SmithLynn Smith
20:41 15 Apr 24
The change to Medicare and supplemental health insurance can be terrifying. John Claeys and The Claeys Group Insurance Services made the process unbelievably simple. John is incredibly knowledgeable and up to date on all of the latest requirements. He explained the process and my options in a very simple and concise way and easily helped guide me in making the best decision for my situation. I cannot imagine navigating this medicare system without him. I also feel confident that he will safeguard and watch my situation in the event of future changes. Knowing that he is watching out for me going forward is the best part of all!
Tena BoneTena Bone
18:06 15 Apr 24
John Claeys has been very thorough with every detail of this important decision for me and my future Healthcare. He has such a sweet and caring spirit. I can't imagine using anyone else for my insurance needs.
Dollene BrownleeDollene Brownlee
15:26 10 Apr 24
John was very helpful explaining different Medicare options
January ShubertJanuary Shubert
13:50 08 Apr 24
Excellent customer service. Professional and knowledgeable. Received what I needed and wanted at a reasonable price.
Melton TimmonsMelton Timmons
23:05 05 Apr 24
John is a great person first. As an agent he is very knowledgeable of the products and services he offers. For every question I had, he provided answers and solutions. I am very comfortable with him and if you need a capable agent, please contact John Claeys.
Rosa MartinRosa Martin
21:53 05 Apr 24
John is a very knowledgeable person in his profession. He has helped my husband, my sister, and myself to find the best affordable insurance for each of us…He made navigating through Medicare a breeze for me. He is willing to help in any way and any time of the day.Thank you John for all your help.
Johnny CoffmanJohnny Coffman
16:33 05 Apr 24
He explained the ins and outs of how Medicare works and clarified the confusion. Highly recommend John Claeys!
Mark BleuerMark Bleuer
22:48 03 Apr 24
John is very professional and courteous. His knowledge and attention to detail is exemplary. I can highly recommend Claeys Group Insurance. He does a great job.
sheila Rhynesheila Rhyne
14:58 03 Apr 24
I have had excellent customer service.Claeys insurance company has helped me for several years now and he does a wonderful job setting me up with the right insurance that fits my needs .I really appreciate the job he does and Thank you again.
Scott GillScott Gill
00:34 03 Apr 24
Highly professional with attention to detail. Felt like John was genuinely interested in matching my needs to the various options.
Karen DeemKaren Deem
21:02 02 Apr 24
John was very pleasant and professional. Medicare can be very confusing. He had all the answers for me.
Beth HamillBeth Hamill
17:52 02 Apr 24
I am so thankful for John's help and kindness...he explains everything so clearly and I feel confident that he is truthful and finding the best plan for me.
Margie FisherMargie Fisher
22:38 13 Feb 24
My husband and I have used John's services for several years, as do many of our friends. At no time has his recommendations let us down. He is kind, patient in making sure we understand our choices and was there for any and all questions afterwards. He would be our ONLY choice when it's your turn to use his insurance services. He will not let you down. What a professional! 🙂
Jerry JonesJerry Jones
02:27 08 Feb 24
John was very helpful in guiding me through the medicare choices. He explained everything thoroughly and answered all my questions.
marvitta hallmarvitta hall
23:31 07 Feb 24

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