Medicare and Social Security are both facing the depletion of their trust funds in the coming decades, with the programs’ trustees issuing updated projections on when the funds are expected to be exhausted.
With the two programs in the spotlight, it’s important to understand what Medicare is and what might happen to the millions of people who rely on it if a funding solution isn’t reached and the program can no longer function.
What is Medicare?
Medicare is a government health insurance plan at the federal level, mostly for older citizens and those with disabilities. The program was enacted in 1965 under President Lyndon Johnson.
Discussions about building out a federal health insurance program for older citizens began as early as 1916 and were central to the discussions about establishing the Social Security program under President Franklin D. Roosevelt in the 1930s.
A decade later, President Harry Truman in 1945 sent a federal health insurance proposal to Congress that didn’t gain any traction until the 1960s.
How is Medicare funded?
Medicare is funded mainly through payroll taxes paid by most employees and employers, along with self-employed people, according to the Centers for Medicare & Medicaid Services.
The program is also paid for through income taxes on Social Security benefits, interest on trust fund investments, and Medicare Part A premiums from those not eligible for premium-free Part A. Funds authorized by Congress also go into funding Medicare, among other channels.
The program itself itself is paid for using two trust fund accounts, the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund.
Who is eligible for Medicare?
Those eligible for the program include people 65 years old and older, eligible young people who have disabilities, and those with end-stage renal disease.
Medicare is a tiered program that includes four parts: Part A (hospital insurance), Part B (Medicare insurance), Part C (Medicare Advantage Plans), and Part D (drug coverage).
The different parts vary in cost depending on a recipient’s needs and which plan is selected. More information about the parts can be found online.
How do I enroll in Medicare?
Signing up for different Medicare programs will have various requirements. You can sign up for Medicare Parts A and B through Social Security, which will help ensure benefits are paid and withheld properly.
You can also sign up for Parts A and B at separate times if you only need one type of coverage. You can sign up for both parts online.
Enrolling in Parts C and D includes a separate process, such as choosing the type of plan you want to receive. More information about plans and coverage can be found online.
When is Medicare funding expected to end?
Medicare is expected to run out in 2036, according to updated projections issued on Monday by the program’s trustees.
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The groups had previously forecasted the trust fund to run out in 2031, but now Congress and the president have an additional five years to prevent the funds from being depleted. Once the funds are exhausted, the program will only be able to pay 89% of total scheduled benefits by relying on continuing program income.
While Medicare will need to be reformed or adjusted to prevent the trust funds from being depleted, both President Joe Biden and former President Donald Trump have vowed not to cut Medicare.
