Medicare Finances: A 2023 Update

The headlines from the 2023 Medicare Trustees Report were that the Hospital Insurance (HI) program faces a long-term deficit and will deplete its trust fund reserves in 2031 and that the rest of the Medicare program will require increasing amounts of general revenues. While true, the outlook for program costs is considerably more favorable than it was a decade and a half ago, and that picture persists even under an alternative scenario in the Trustees Report, which assumes that Congress phases out some of the cost controls in current law. Nevertheless, costs remain high. This brief summarizes the current state of Medicare’s finances. The discussion proceeds as follows. The first section provides an overview of the Medicare program. The second section describes the 2023 Trustees Report projections that use current-law assumptions. The third compares the current-law projections to an alternative scenario prepared by Medicare’s Office of the Actuary. The fourth explores possible reasons for Medicare’s high costs. The final section concludes that while Medicare’s finances – even under the alternative assumptions – have improved considerably, the costs remain high. The reason is not the generosity of the program – in fact, it has serious benefit gaps – but rather that Medicare operates in a country with extraordinarily high health care costs.