Burdensome regulations. Immigration. Inflation. The Russia-Ukraine military conflict. Threats to the U.S. dollar. Trade imbalances.
Those are some of the issues President-elect Donald Trump has promised to address in his second term. But what about a federal program that covers more than 66 million Americans and faces a looming crisis? Will Trump fix Medicare's biggest problem in 2025?
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Medicare's ticking time bomb
Medicare was created in 1965 to provide health insurance for Americans aged 65 and older. The program initially included Part A (hospital insurance) and Part B (medical insurance for outpatient medical services). In 1999, Part C (Medicare Advantage) plans were added as part of the Balanced Budget Act of 1997. Medicare Part D (prescription drug coverage) was added in 2006.
Medicare Parts B and D are on solid financial footing. Premiums are adjusted annually to reflect the expected costs for the next year.
It's a different story for Medicare Part A and the portion of Medicare Advantage funded by Part A revenue. The Medicare Trustees 2024 report projects that total Medicare Part A spending will exceed revenue by 2030. At that point, the reserve cash held in the Federal Hospital Insurance Trust Fund will be tapped to compensate for the revenue shortfall. However, the Medicare Trustees estimate that this trust fund will be depleted by 2036.
Unless something is done to boost revenue and/or reduce expenses, Medicare benefits must be cut beginning in 2036. However, ongoing revenue from government contributions and payroll taxes should cover around 89% of benefits.
Trump's Medicare plans
With Medicare on track to begin operating in the red the year after Trump leaves office, what plans does the president-elect have for the major federal program? Perhaps most importantly, Trump has pledged not to cut Medicare benefits.
During his first term, Trump's proposed budgets included cost reductions for Medicare. However, those cost reductions wouldn't have affected Medicare beneficiaries very much. And Trump's budgets weren't passed by Congress, anyway.
Trump has adamantly insisted he won't reduce benefits to either Medicare or Social Security in his second term, stating that he "will not cut a single penny" from either program. Instead, he has proposed increasing benefits in one key way by covering at-home senior care.
Perhaps the most significant change the president-elect might make to Medicare, though, is to emphasize Medicare Advantage over traditional Medicare. His pick to run the Centers for Medicare and Medicaid Services, Dr. Mehmet Oz, is a vocal proponent of Medicare Advantage.
Some of Trump's other policy proposals could affect Medicare, too. For example, the Republican National Committee (RNC) 2024 platform referenced Trump's plan for strict immigration enforcement as a way Medicare would be protected financially by keeping illegal immigrants from being enrolled in Medicare.
The fix is (not) in
But while the RNC platform stated that the GOP would ensure that Medicare "remain[s] solvent long into the future" it didn't provide details on how that would be accomplished other than "reversing harmful Democrat policies and unleashing a new Economic Boom." President-elect Trump hasn't outlined specific policies on how he would address Medicare's projected revenue shortfall, either.
Trump mentioned increasing oil and gas drilling during the presidential campaign as an alternative to bolster Social Security's finances. Could this approach help keep Medicare solvent? Probably not.
The nonpartisan Committee for a Responsible Federal Budget conducted an analysis that found Social Security's financial problems wouldn't be fixed even if all federal lands were made available for drilling and all of the revenue generated went to Social Security. If this proposal isn't enough to address Social Security's challenges, it couldn't also address Medicare's challenges.
It seems highly unlikely that Trump will fix Medicare's biggest problem in 2025. Since the program won't begin to operate in the red until the year after he leaves office, Trump may choose to leave the issue to the next administration. However, you never know what will happen in the world of politics.
