CBO: Medicare Part A trust fund to run out by 2040, 12 years sooner
Feb 24th 2026
A newly updated CBO report says the Hospital Insurance trust fund will be exhausted in 2040 after recent tax law changes and weaker revenue projections cut its projected life by 12 years, forcing potential benefit reductions unless Congress acts.
- The CBO now projects the HI trust fund will be depleted in 2040, 12 years earlier than last year's estimate.
- A major cause is the 2025 reconciliation law (Public Law 119-21) which reduced taxes on Social Security benefits and added a temporary deduction for people 65 and older.
- Lower expected worker earnings reduced projected payroll tax revenue and smaller trust balances will generate less interest income.
- Higher per-enrollee fee-for-service spending in 2025 and larger Medicare Advantage bids in 2026 raised projected outlays.
- If the trust fund is exhausted, law limits Medicare to paying only incoming revenue, prompting an estimated 8% benefit cut in 2040 rising to 10% by 2056.
- The 25-year actuarial deficit is now 0.30% of taxable payroll, 0.17 percentage points worse than last year, meaning lawmakers must raise revenue, cut payments, transfer funds, or combine those steps to restore solvency.