Medicare has been running in the red since 2008, i.e., the revenue collected is less than the benefits paid out. The shortfall is made up by cashing in the non-market, interest bearing T-bills in the Medical Trust Fund.
40% of all Medicare expenditures come from the General Fund. The premiums collected for Medicare Part B only cover, by law, 25% of the costs. The other 75% comes from the General Fund. As 10,000 Baby Boomers retire every day thru 2030, the costs of Medicare will continue to increase and consume more and more of the Federal budget.
People need to read the 2018 Trustee's Report
The Trustees project that the HI Trust Fund will be depleted in 2026, three years earlier than projected in last year’s report. At that time dedicated revenues will be sufficient to pay 91 percent of HI costs. The Trustees project that the share of HI cost that can be financed with HI dedicated revenues will decline slowly to 78 percent in 2039, and will then rise gradually to 85 percent in 2092. The HI fund again fails the test of short-range financial adequacy, as its trust fund ratio is already below 100 percent of annual costs, and is expected to decline continuously until reserve depletion in 2026.
For SMI, the Trustees project that both Part B and Part D will remain adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs. However, the aging population and rising health care costs cause SMI projected costs to grow steadily from 2.1 percent of GDP in 2017 to approximately 3.6 percent of GDP in 2037, and to then increase more slowly to 3.9 percent of GDP by 2092. General revenues will finance roughly three-quarters of SMI costs, and premiums paid by beneficiaries almost all of the remaining quarter. SMI also receives a small amount of financing from special payments by States, and from fees on manufacturers and importers of brand-name prescription drugs.
The Trustees project that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.7 percent of GDP in 2017 to 5.8 percent of GDP by 2038, and then increase gradually thereafter to about 6.2 percent of GDP by 2092.
Medicare is not self-sustaining and is heavily subsidized by the General Fund.
This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system! Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison.
If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from? Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear.
We are constantly reminded of the government's inability to manage a budget under the arbitrary debt ceiling (raised 80 times since 1940) and that the national "on budget" debt is over $14T. The debt conversation all too often omits the "off budget" debt that includes underfunded liabilities to Social Security and Medicare which is about $110T according to a Forbes article; totaling more than $900K per working American.