Your Medicare bill just got a 10-year forecast and it’s not pretty

CBO projects Medicare costs will double

The Congressional Budget Office released its annual budget outlook on Feb. 11, and the numbers are striking.

Medicare now costs the federal government about $1.1 trillion a year. By 2036, that figure is expected to hit $2 trillion, more than 4 percent of the nation’s GDP.

Medicare is the largest single buyer of health care in the country, covering more than 68 million seniors and people with certain disabilities.

The growth is driven by a perfect storm of demographic and economic forces.

Baby boomers are flooding into Medicare

The biggest factor is sheer numbers.

Baby boomers, born between 1946 and 1964, are turning 65 at a rapid clip. By 2029, every single boomer will have reached Medicare eligibility age.

Medicare Part A enrollment is expected to hit 71.5 million by 2027, then climb to 80.5 million by 2036. That’s roughly a 15 percent jump in just one decade.

More people on the rolls means more money going out the door.

Costs per person keep climbing

Adding millions of new enrollees is only part of the problem. Costs for each person on Medicare are expected to rise at least 5 percent every year.

Health care prices continue to grow faster than the overall economy, and federal spending per beneficiary keeps outpacing GDP per person.

Put those two trends together, more people and higher costs per person, and the spending curve bends sharply upward with no sign of slowing down.

Fewer workers paying into the system

Medicare runs largely on a 2.9 percent payroll tax on workers’ wages.

In 1967, 4.5 workers paid into the system for every one person receiving benefits. By 2022, that ratio had dropped to 2.9 workers per beneficiary.

It’s expected to fall to just 2.5 by 2029. Lower birth rates and slower growth in the working-age population are making the gap worse. Fewer people paying in and more people drawing out is a math problem with no easy answer.

Prescription drug costs are surging

Here’s where the projections took a sharp turn. Insurers running Medicare Part D now project a 35 percent jump in per-enrollee costs for 2026.

The CBO had expected only about a 5 percent rise. If costs stay at this higher level, Part D spending over the next decade could run about $500 billion more than previously estimated.

Increased spending on diabetes drugs and newer weight-management medications are the key drivers behind the surge.

Trust fund faces insolvency by 2033

The 2025 Medicare Trustees Report projected the Part A trust fund will run out of money by 2033, three years earlier than the trustees estimated just one year before.

Once the fund is depleted, Medicare could only cover about 89 percent of hospital and related costs. That gap could widen to a 14 percent shortfall by 2049 without congressional action.

The CBO’s own February 2026 baseline uses different assumptions and estimates exhaustion around 2040.

What insolvency would mean for seniors

If the trust fund runs dry, payments to hospitals and other providers would face automatic cuts. Seniors could lose access to hospital care, hospice, and home health services.

By 2036, roughly 80 million people are expected to depend on Part A coverage. Congress has never allowed a major trust fund to become insolvent, but no legislation to prevent it is moving forward right now.

That leaves millions of seniors in a waiting game.

Drug price negotiation brings some relief

Not all the news is bad. The Inflation Reduction Act of 2022 gave Medicare the power to negotiate prices on certain high-cost drugs for the first time.

Negotiated prices on 10 Part D medications took effect on Jan. 1, 2026, covering conditions like diabetes, heart disease, cancer, and autoimmune diseases.

Nearly 9 million enrollees who use those drugs are expected to save about $1.5 billion in out-of-pocket costs this year.

Another 15 drugs will get negotiated prices starting in 2027.

Out-of-pocket caps protect some enrollees

Starting in 2025, a new cap limited Part D out-of-pocket drug spending to $2,000 per year. That cap rose to $2,100 for 2026 and will keep adjusting for inflation.

The change replaced the old “donut hole” coverage gap that left many seniors paying steep costs once they hit a certain spending level.

Enrollees can now spread their drug costs in equal monthly payments instead of paying upfront. Insulin copays remain capped at $35 per month.

Medicare is part of a larger fiscal problem

Medicare doesn’t exist in a vacuum. The CBO projects the federal deficit will grow from $1.9 trillion in 2026 to $3.1 trillion by 2036.

Medicare, Social Security, and interest on the national debt are the three biggest drivers of that growth. Debt held by the public could reach 120 percent of GDP by 2036, exceeding historical highs.

Together, Social Security and Medicare spending is projected to rise from 8.7 percent of GDP in 2027 to 10.1 percent by 2036.

Most seniors now choose private Medicare plans

In 2025, 54 percent of eligible beneficiaries enrolled in Medicare Advantage, the private plan option. That’s up from just 19 percent in 2007.

But the shift comes at a cost: Medicare Advantage payments to insurers run about 20 percent higher per person than traditional Medicare.

That difference added an estimated $84 billion in extra federal spending in 2025 alone. Some major insurers are leaving certain markets for 2026, though most beneficiaries still have 30 or more plan choices.

No fix is on the table yet

CBO Director Phillip Swagel said the fiscal path is “not sustainable.” The Peterson Foundation called the report an urgent warning about the nation’s finances.

The Bipartisan Policy Center noted that deficits this large are unprecedented for a growing, peacetime economy.

Despite all the warnings, Congress has not introduced major legislation to address Medicare’s long-term funding gap.

The 2025 Medicare trustees urged lawmakers to act sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.

This article was created with AI assistance and human editing.

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