6. Medicare Part A: the Hospital Insurance trust fund¶
Short answer: Part A is paid entirely from its trust fund, and that fund is financed almost entirely by its own taxes, but it is projected to run out in 2033. Unlike Parts B and D, the Hospital Insurance (HI) trust fund has no automatic call on general revenue. After depletion, "no provision exists to use transfers from the general fund of the Treasury or any other means to cover the HI deficit" (Medicare TR 2026, PDF p. 32).
| HI income, calendar year 2025 | $ billions | Share of HI income |
|---|---|---|
| Payroll taxes | 403.2 | 87.2% |
| Income tax on Social Security benefits | 41.1 | 8.9% |
| Interest on trust fund securities | 9.1 | 2.0% |
| Premiums | 6.0 | 1.3% |
| Government (general fund) contributions | 1.1 | 0.2% |
| Other | 1.9 | 0.4% |
| Total income | 462.4 | |
| Expenditures | 444.2 | |
| Surplus | 18.2 |
Table 6. Source: 2026 Medicare Trustees Report, Table II.B1 (PDF p. 18) and PDF pp. 13, 54, 57. Shares are computed (data/derived.json). Premiums of $6.0 billion include about $0.25 billion from Medicare Advantage enrollees; premiums from people who buy Part A, or that Medicaid pays for them, were about $5.7 billion (PDF p. 57).
Where the money comes from.
- Payroll tax. The HI tax is 1.45 percent of wages paid by the employee and 1.45 percent by the employer, 2.9 percent in total, on all wages with no cap. Since 2013 an Additional Medicare Tax of 0.9 percent applies to wages above $200,000 (single) or $250,000 (married filing jointly); it is credited to HI. See Section 4 for the statutory sources.
- Income tax on Social Security benefits. The income tax on up to 50 percent of benefits goes to the Social Security trust funds; "the revenue associated with the amount between 50 and 85 percent of benefits is allocated to the HI trust fund" (PDF p. 57).
- Premiums. About 99 percent of beneficiaries pay no Part A premium because they have at least 40 quarters of Medicare-covered work. People with fewer than 30 quarters pay $565 a month in 2026; people with 30 to 39 quarters pay $311 (CMS fact sheet, Nov. 2025).
- A naming trap. The 3.8 percent Net Investment Income Tax is often described as a Medicare tax, but it is not one of HI's income sources; see Section 4.
The outlook.
- 2025 was a surplus year. HI income exceeded spending by $18.2 billion, and the fund's assets rose to $255.7 billion at the end of 2025 (PDF pp. 13, 54). The Trustees project a small surplus in 2026 and deficits from 2027 until the fund is depleted (PDF p. 33).
- Depletion: second quarter of 2033, one quarter earlier than in the 2025 report (PDF p. 14). At that point income would cover 89 percent of scheduled Part A benefits, rising to 93 percent by 2100 (PDF p. 14).
- The 75-year shortfall is 0.56 percent of taxable payroll, up from 0.42 percent in the 2025 report (PDF p. 15). Closing it at once would take raising the HI tax rate from 2.90 to 3.46 percent from January 2026, or cutting HI benefits by 12.0 percent (PDF pp. 15-16). In present value the 75-year unfunded obligation is $4.2 trillion for HI and zero for SMI, whose general-revenue financing is automatic (PDF p. 17).
What "funded by the trust fund" means in cash. A trust fund's reserves are special-issue Treasury securities, which "represent a loan from the trust funds to the general fund" (Medicare TR 2026, PDF p. 222). When a fund spends more than it takes in, it redeems securities, and the Treasury's Financial Report states what that costs the rest of the budget: "Redeeming these securities will increase the government's financing needs and require more borrowing from the public (or less repayment of debt), or will result in higher taxes than otherwise would have been needed, or less spending on other programs than otherwise would have occurred, or some combination thereof" (Financial Report of the U.S. Government FY2025, PDF p. 140). The trust fund pays the bill in the accounts; the cash comes from the same place as all other federal cash. The same holds for Social Security (Section 7).