Posted on 07/18/2026 7:25:24 PM PDT by SeekAndFind
Last month we highlighted Social Security’s cumulative effect on federal deficits in the next ten years. That often surprises people who think Social Security is “paid for” through payroll taxes.
What will surprise them even more: the much larger Medicare effect on federal deficits over the next decade.
You might ask yourself: don’t people pay for Medicare with payroll taxes when they work or with monthly premiums when they retire?
They do. And payroll taxes do cover almost all of Part A’s expenditures. But it is written into law that three-quarters of Parts B and D are explicitly subsidized by taxpayers. The Medicare Trustees report calls that money “government contributions.” It’s also often called general fund revenue transfers, since the actual cash is borrowed from taxpayer revenue. (Part A covers inpatient hospital stays. Part B covers doctor visits, outpatient care, and durable medical equipment. Part D covers prescription drugs.)
Those subsidies, and the interest on the borrowing they require, account for nearly half of everything the federal government will borrow over the next ten years.
Our two plots show how much Medicare adds to the federal deficit each year and what percent of the federal deficit comes from Medicare’s general fund revenue transfers.
Total federal deficits are expected to be $1.85 trillion in 2026 and $2.96 trillion in 2035, an increase of 60 percent. Medicare’s effect on the deficit is projected to be $651 billion in 2026 and $1.73 trillion in 2035.
That’s why Medicare’s share of the federal deficit rises from 35 percent to 58 percent in just ten years. It passes half of the entire federal deficit in 2031.
How do you get these numbers? It’s relatively simple.
First, you project what spending will be for Parts A, B, and D. Then you subtract everything Medicare raises on its own. That includes payroll taxes, beneficiary premiums, the tax on Social Security benefits, and a few other small revenue sources. What you’re left with is the amount the general fund has to cover. That’s estimated to be $651 billion this calendar year and $1.34 trillion in ten years.
And since all this extra spending comes from federal borrowing, you then have to add in the interest costs. Granted, I’m starting from zero and not building in previous borrowing effects, so even these numbers are conservative. So, while 2026 has zero dollars of interest, the borrowing cost is up to $384 billion a year by 2035.
Why are the numbers rising so fast?
Yes, more baby boomers are retiring, but that’s actually a small portion of the cost.
Instead, it’s driven by the per-person spending, mostly in Part B. When it costs more to cover either Part B or Part D, the government (via taxpayers) has to pay for three-quarters of the increase.
Part B spending per person is on track to increase between 5 percent and 8 percent a year, from $9,776 in 2026 to $17,618 in 2035. Once you combine that 80 percent per-person increase with more enrollees, Part B spending doubles.
Part D spending is also going up but is supposed to settle into a roughly 3 percent increase year-over-year once the Inflation Reduction Act’s provisions all take effect.
Part A is almost entirely paid for with payroll tax revenue and revenue from the taxation of benefits. In the future that will not be the case.
When splitting out by program, about 7 percent of the increase in deficits comes from Part A, 71 percent comes from Part B, and 22 percent comes from Part D.
By the way, ordinary consumer inflation isn’t really a driver. Medicare’s per-person costs have grown faster than inflation for decades, even as its payment rates have been held down by law. What grows is the utilization and mix of care. Each person gets more services over time, and the newest ones are often the most expensive. Remember, Medicare is an entitlement program without a true benefit cap. Medicare covers a broad set of services and traditional fee-for-service Medicare mostly pays for as much of them as beneficiaries use. Put it together and you see why per-person spending far outpaces inflation.
What do the numbers tell us?
That Medicare is heavily subsidized, and the more health care costs grow, the more it is going to drive federal borrowing.
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Medicare data are from the 2026 Medicare Trustees Report, Tables III.B4, III.C4, and OACT supplementary tables.
Federal deficits are from CBO’s February 2026 Budget and Economic Outlook, Table 1-2, adjusted to exclude the effects of payment timing shifts.
Medicare outlays and revenues are in calendar years. Deficits are in fiscal years.
The interest calculation starts from a zero balance in 2026, so it counts only the borrowing this decade itself adds and nothing inherited from Medicare’s past. Federal deficits, by contrast, include interest on all prior borrowing. The early-year shares are understated for that reason.
Projections assume Part A benefits are paid in full after the trust fund depletes in 2033.
All figures are nominal.
Too many people made bad health choices throughout their lives. Diabeetees and such.
Bkmk
Unnecessary procedures or idiotic protocols that increase costs.
RE: old ladies have a bigger army than the Hoover Institute.
But the inexorable law of economics will soon catch up on you. The pain will come soon or it will come later, BUT COME IT WILL regardless of how the old ladies vote.
How about the fraud we keep hearing abou?Also some of the cost going to people who never paid into it...
How about go after welfare, medicaid, ebt?
There is a lot of fraud in medicare, Medicaid and hospice services.
I would like to see how much of that per person spending is based on preventative screenings, and routine office visits which are not really needed for a healthy person who is low risk for certain diseases and conditions.
More to the point. How much of the deficit is driven by Medicare fraud?
More than anything and to include kickbacks and payoffs to politicians, the federal deficit is the direct fault of the criminal politicians working in the largest criminal enterprise in the world, the DC Federal Government. They go to DC just to get in on game and to become millionaires in short order. Stop them prom looting the public purse and this country would be in the black.
Misleading article...current Medicare expenses are covered by FICA taxes withheld (in the green). The fact that the Medicare trust funds are required to buy/invest in FedGov “special treasury bills” to earn interest, and then the feds/general fund has to pay the interest and then the principal on the “special T-Bills” is not the fault of Medicare which is currently running in the green. The Feds “general fund” is being drained by deficit spending in other areas rather than Medicare or Social Security.
Medicare financials for 2025:
https://www.cms.gov/oact/tr/2026
Social Security Financials:
(In the red with current FICA taxes/withholding wise but drawing on a $2 Trillion reserve until until that runs out in 2032 or so):
https://www.ssa.gov/OACT/STATS/table4a1.html
Most Freepers are senior citizens and are on Social Security and Medicare, myself included. This late in the game we don’t want the rug to be pulled out from under us.
Don't forget BS "disability" claims by lazy young people.
I once read about a woman in her 20s that was on permanent disability because she allegedly suffers from "long COVID." She spoke about it on her social media, advising other people how to get on it. She looked perfectly healthy to me.
Then there are all the BS "Going to work is bad for my mental health" claims.
Back in the 1990s, I learned that those over 65 who arrive in the U.S. under "refugee status" automatically qualify for SSI and Medicare.
And the above is all legal. It doesn't include all the fraud.
Now do welfare. Welfare never threatens to run out of money and it never gets tracked as a % of our deficit. It just keeps growing and growing...see recent report out of NY.
Most of our 'deficit' is pure fraud yet with baseline budgeting it continues to be funded. Did I miss any huge cuts to budget items due to fraud discovery? If we keep filling that bucket fraudsters will keep dipping out of it. Outright fraud is a massive percentage of our yearly deficit and after 50 years or so fraud accounts for (WAG) 70-80% of our near $40 trillion in debt. I'm sure Medicare is riddled with fraud so a huge percentage of 35% is accountable to fraud.
Ppl would also be surprised to learn that Medicare isn’t free & that seniors are taxed twice for Social Security, first as a payroll tax & then taxed as income when they actually start withdrawing it. 🤬
FRAUD and taking care of ILLEGALS.....FREE HOUSING, MEDICAID...EDUCATION....FREE MONEY EVERY MONTH......FREE FOOD!!!
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