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.

Linda WilliamsLinda Williams
10:08 12 Jul 23
I had a 5 star experience and would recommend him. Always returning my calls promptly, very helpful and informative, listened to what my needs was regarding my Medicare. I truly felt comfortable with John's help to navigate through the maze of Medicare
Cindy KulakCindy Kulak
14:51 18 Jun 23
John is very knowledgable, honest and ethical in helping clients evaluate Medicare options and get enrolled. He made the process extremely easy for myself and my husband.
Leeann MoosLeeann Moos
17:26 06 Apr 23
When I became eligible for Medicare, my phone was constantly under attack from Medicare options sales folk. Since I needed help understanding my options and life is too short to do business with annoying people a little research was in order. Thats how I found John. His other customers seem very pleased with his service and I decided to give him a try. I was NOT disappointed! He did an excellent job for me, is extremely personable and I could not be happier. Thank you John
Rose WrightRose Wright
16:07 05 Apr 23
I am so thankful for the help that Mr. John was able to assist me with medicare information. After being bombarded with letters and phone calls you just need someone who can walk you through the confusion. And after getting all the info and the best plan and benefits for what i needed. I am glad that He was there for me.Thank you so very much,Rose Wright
Steve HenselSteve Hensel
21:08 04 Apr 23
Claeys Group is great to work with. John is truly professional, knowledgeable and makes the entire process flow so much more smoothly than I expected. I would highly recommend him.
Deborah RounsavallDeborah Rounsavall
14:25 07 Mar 23
I changed from my person finance planning group to John for help. Others led me astray. John is very responsive and follows up promptly. Even helped me on the weekend at the end of year to get all my documents in on time so I didn't lose insurance coverage. Explains all the options in a manner that us rookies can understand it. I highly recommend John.
Setella ParksSetella Parks
13:12 07 Mar 23
John's knowledge is invaluable when it comes to navigating the murky water of Medicare plans. He answered all our questions in a manner we could understand and helped us compare benefits between plans, services, and providers readily available in our area. I am so happy we called on him to assist us! He handled EVERYTHING professionally and patiently and has followed up to make sure we are good. Highly recommend his 5 star service!
Sherry JonesSherry Jones
21:01 23 Feb 23
John was recommended by my sister-in-law, who spoke very highly of him. He wrote out the differences between policies and explained it step by step to me so I could understand which policy would be best for my needs. He was professional but also down to earth so I could be at ease. He did this at my bed side which was such a blessing for me. I highly recommend John for your Insurance needs.
19:40 20 Feb 23
We were recommended by friends to call John Claeys for our insurance. He came twice to gather information on what we were looking for and returned with information and details. We are delighted to have John Claeys as our agent and would recommend to our friends and anyone else to call John Claeys today.Tom and Debbie
Joyce SandvikJoyce Sandvik
20:32 30 Aug 22
John Claeys came to our house to talk about all aspects of Medicare. He wrote out some information on a notepad as he talked and answered our questions. He gave us the handwritten notes along with printouts of more information specific to my needs. My husband and I took o a few days to discuss the options. John took a list of my medications and researched all the available prescription insurance policies for me. He narrowed it down to the best policy (best prescription prices) for me. It was so easy and I felt confident I was getting exactly what I need when I turn 65. Every September, he will research prescription policies from my updated list of medications to find the best policy for my needs. Thanks to John Claeys for making this transition extremely easy and effortless.
Marilyn ScottMarilyn Scott
09:35 23 Jul 22
John enrolled my husband into Medicare 4 years ago. I knew then I wanted him to help me with my Medicare when it was my time to enroll. John helped me recently. He is very knowledgeable, humble and so patient. He made sure I had the best plan for me. He genuinely cares about his clients. He is the best insurance consultant! I highly recommend John for your Medicare needs!!
James MartinJames Martin
20:31 20 Jun 22
John did a great job of providing many options for my insurance. He is very thorough.
Judy MarkmanJudy Markman
17:02 20 Jun 22
John goes above and beyond to find the best insurance to fit your needs at an affordable price. I definitely recommend!
Dave LemingDave Leming
16:56 20 Jun 22
John was referred to my wife and I as we began to transition to use Medicare as our insurance options. He was very knowlegeable about all things related to government programs and supplemental options as well. I would strongly recommend his services to anyone requiring such support.
Ed HareEd Hare
14:16 08 Jun 22
John was recommended to us by a friend as we were turning 65 and having to make decisions on our medicare and advantage plan choices.John was thorough, informed, patient and engaged in helping us wade through all the minutia we were receiving to package the best set of programs for our future healthcare needs.We are happy and confident as healthcare needs arise having John at our side.Debi and Ed Hare
Julie SimpsonJulie Simpson
02:36 14 May 22
We selected an awesome advisor in John Claeys! John was dedicated to our needs in counseling our new Insurance choices with Medicare. He is sincere in getting his customers into the program that is best for their situation. John was sincere in explaining the process and we are happy to refer him to others! Steve and Julie Simpson
Sherry HilliardSherry Hilliard
16:55 18 Feb 22
John was extremely helpful when I had to select my Medicare supplemental policy. He is very knowledgeable in the various insurance products. I would recommend John to anyone needing insurance, and in fact, I have recommended him to several of my friends.
Margie SmithMargie Smith
01:08 16 Feb 22
Highly recommend Claeys Group Ins Service, John has assisted with my Medicare supplement and RX choices for past couple years. He is very knowledgeable of the various companies and policies available. Saved money and introduced me with a 5star company.
16:56 10 Feb 22
John came to my house and explained the process of signing up to Medicare in an understandable way. He gave me the steps to take and assisted in the planning. With his help, I got it done. Before he came, it all seemed overwhelming. He's so genuinely nice, and I felt like I had known him for a long time. I highly recommend him, and in fact, already have recommended him to friends and family.
Rebecca NelsonRebecca Nelson
21:00 04 Feb 22
John Claeys is a great individual to work with you on insurance needs. He searched out the best policy and an affordable one that I could handle. He researches every year to be sure I’m getting the most for my money! Highly recommend this group.
Dorys GardensDorys Gardens
12:20 23 Jan 22
John was so pleasant to work with. He explained everything clearly and did not pressure me to make a decision one way or the other. He shopped for the best customized drug plan which will be saving me money in the long run. I highly recommend letting him guide you through the medicare process.

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