https://www.crfb.org/our-work/projects/combined-social-security-trust-funds

The Old-Age and Survivors Insurance (OASI) Trust Fund is a critical component of Social Security in the United States, responsible for paying retirement benefits to eligible retirees and their dependents and survivors.¹

Here’s a full explanation of its history and how it started:

History of the OASI Trust Fund

• Origins in the Social Security Act of 1935: The roots of the OASI Trust Fund lie in the Social Security Act of 1935, signed into law by President Franklin D. Roosevelt.² This landmark legislation was a response to the widespread economic vulnerability exposed by the Great Depression, aiming to provide a safety net for workers and their families.³ The original Act established an “Old-Age Reserve Account.”⁴
• Establishment of the OASI Trust Fund (1940): The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was officially established on January 1, 1940, as a separate account within the U.S. Treasury.⁵ This was a result of the Social Security Act Amendments of 1939, which expanded Social Security to cover dependents and survivors, not just retirees, thus making the “Survivors Insurance” part of the name relevant.⁶
• Expansion and Evolution:
  • 1956: The Disability Insurance (DI) Trust Fund was created, establishing a separate fund for disability benefits.⁷ The OASI and DI funds are often discussed together as the OASDI Trust Funds or “Social Security Trust Funds.”
  • Ongoing Adjustments: Throughout its history, Social Security, and thus the OASI Trust Fund, has undergone numerous adjustments through legislative changes to address economic conditions, demographic shifts, and evolving needs. This includes changes to tax rates, benefit formulas, and eligibility requirements. Notable amendments include those in 1977 and 1983, which aimed to address financial shortfalls.

How it Started and With What Funds

The OASI Trust Fund, and Social Security in general, was designed as a contributory social insurance program. This means that benefits are earned through contributions made by workers and their employers.

Here’s how it started and its funding mechanisms:

1. Payroll Taxes (FICA and SECA): This is the primary and initial source of funding.⁸
   • Federal Insurance Contributions Act (FICA): Enacted in 1937, FICA required workers and their employers to pay taxes to support the Social Security system.⁹ Initially, payroll taxes were 1% each for employees and employers on taxable wages. This rate gradually increased over the years.
   • Self-Employment Contributions Act (SECA): Similar to FICA, SECA applies to self-employed individuals, who pay both the employer and employee portions of the tax.¹⁰
   • These payroll taxes are collected by the Internal Revenue Service (IRS) and deposited into the General Fund of the Treasury. Crucially, amounts equivalent to the payroll taxes are then immediately and automatically appropriated to the OASI (and DI) Trust Funds on an estimated basis.¹¹
2. Investment of Surplus Funds:
   • When the income to the OASI Trust Fund (primarily from payroll taxes) exceeds the amount needed to pay current benefits and administrative expenses, the surplus funds are invested in special interest-bearing U.S. government securities.¹² These are essentially IOUs from the U.S. Treasury, guaranteed by the “full faith and credit” of the federal government.¹³
   • The interest earned on these investments is also credited back to the OASI Trust Fund, contributing to its overall balance.¹⁴
3. Taxation of Benefits (Later Addition):
   • Beginning in 1984, a portion of Social Security benefits became subject to federal income taxation for certain higher-income beneficiaries. The revenue generated from this taxation is also credited to the OASI and DI Trust Funds.

In essence, the OASI Trust Fund was started and continues to be funded by:

• Dedicated payroll taxes paid by workers, their employers, and self-employed individuals on covered earnings.¹⁵
• Interest income earned from the investment of accumulated surplus funds in U.S. government securities.¹⁶
• Revenue from the taxation of Social Security benefits (for higher-income beneficiaries).

It’s important to understand that the OASI Trust Fund is not a “lockbox” of individual accounts, but rather a dedicated accounting mechanism within the U.S. Treasury.¹⁷ The money collected is used to pay current beneficiaries, and any surplus is invested in government bonds.¹⁸ These bonds represent a claim on the U.S. government, ensuring that the funds will be available when needed to pay future benefits.¹⁹

The Precipice of 2034: A Geriatric Financial Reckoning

As you stand at the threshold of your 71st year in America, navigating the intricate labyrinth of your present financial existences, the specter of 2034 looms large, casting a foreboding shadow over the future solvency of foundational American social welfare programs: Social Security and Medicare. This report, a stark prognostication grounded in demographic shifts, actuarial assessments, and recent legislative maneuvers, aims to illuminate the perilous financial landscape that awaits, particularly for the elderly cohort, of which you are a venerable member. The objective is to provide a granular, unvarnished depiction of the impending fiscal realities, unburdened by political platitudes.

The Demographic Imperative of 2034: A Silver Tsunami

The demographic profile of the United States by 2034 portends a transformative epoch, characterized by an unprecedented demographic inversion. The U.S. Census Bureau projects that by 2034, for the first time in the nation’s history, older adults, those over 65, will outnumber children.¹ This demographic pivot is primarily attributable to the unrelenting march of the Baby Boomer generation into their twilight years, coupled with persistently low fertility rates and increased longevity.

Specifically, by 2030, all Baby Boomers will be over 65, leading to a scenario where one in every five Americans will be of retirement age.² This escalating dependency ratio – the proportion of retirees to working-age individuals – places immense strain on pay-as-you-go systems like Social Security and Medicare, which rely on current workers’ contributions to fund current retirees’ benefits. The slowing rate of population growth, with deaths projected to exceed births by 2038, further exacerbates this imbalance, making net international migration an increasingly critical, albeit uncertain, component of future demographic stability.³ The non-Hispanic White population is projected to continue its decline, while Hispanic and Asian populations are expected to grow significantly, contributing to a more racially and ethnically diverse older population.

The Predicted Shape of Social Security and Medicare in 2034: A Confluence of Crises

The financial trajectories of Social Security and Medicare by 2034 paint a grim picture, marked by impending trust fund depletions and a widening chasm between incoming revenues and outgoing obligations.⁴

Social Security’s OASI Trust Fund: The Old-Age and Survivors Insurance (OASI) Trust Fund, which provides your monthly Social Security payments, is projected by the Social Security and Medicare Trustees to become insolvent around 2033 or 2034.⁵ This means that, absent legislative intervention, Social Security will only be able to pay approximately 81% of scheduled benefits. For an individual like yourself, currently relying on every dollar, an across-the-board benefit cut of this magnitude would represent a catastrophic diminution of your guaranteed income, profoundly impacting your ability to meet basic living expenses. The actuarial shortfall over the next 75 years for Social Security is estimated at a staggering 3.82 percent of taxable payroll, a figure that has regrettably worsened in recent projections.⁶

Medicare’s Hospital Insurance (HI) Trust Fund: Medicare’s Hospital Insurance (HI) Trust Fund, which helps cover your prescription medication costs, faces an even more immediate and precarious future.⁷ Projections indicate its reserves will be depleted by late 2033. At that juncture, only about 89% of promised benefits would be payable from dedicated revenues. Given the exponential growth in healthcare expenditures, driven by both an aging populace and escalating per-beneficiary costs, the long-term solvency of Medicare presents an equally daunting challenge. Total gross Medicare costs are projected to burgeon from 3.8 percent of GDP in 2024 to 6.2 percent by 2049, with a significant portion of these costs requiring funding from general revenue, thus necessitating additional national borrowing.⁸

The exacerbation of these fiscal vulnerabilities is partly attributed to revised demographic assumptions, including a slower recovery in fertility rates and a lowered assumption for the long-term share of GDP earned as labor compensation, which directly impacts payroll tax revenues. Furthermore, higher-than-expected Medicare expenditures in 2024 and faster projected growth in inpatient hospital and hospice spending contribute to the accelerated depletion of the HI Trust Fund.

The “One Big Beautiful Bill” and its Perilous Ramifications

The legislative landscape, particularly with the advent of “Trump’s Big Beautiful Bill” (OBBBA), has introduced further complexities and, arguably, accelerated the decline of these vital programs.⁹ While the bill does not directly dismantle Social Security or Medicare, its indirect effects are deeply concerning for current and future beneficiaries.

One critical impact stems from the bill’s provisions related to the taxation of Social Security benefits. Although a direct elimination of taxes on Social Security benefits was not enacted, the bill includes a temporary increase to the standard deduction for older people. While this might offer some marginal relief for certain retirees by lowering their taxable income, it also reduces the revenue collected from the income taxation of Social Security benefits that are deposited back into the Social Security and Medicare trust funds. Estimates suggest this could reduce total taxation of benefits by approximately $30 billion per year, accelerating the insolvency of the Social Security OASI trust fund by several months and the HI trust fund by more than a year.¹⁰

Moreover, the OBBBA has significant implications for broader healthcare access and the Medicaid program, which often serves as a crucial safety net for low-income seniors.¹¹ The Congressional Budget Office (CBO) estimates that the bill’s health provisions could result in millions losing health coverage by 2034, partly due to increased work requirements for certain aid recipients and changes to eligibility criteria.¹² While ostensibly targeting “waste, fraud, and abuse,” such measures could disproportionately impact vulnerable populations, including the elderly and disabled, by creating administrative hurdles and potentially forcing states to reduce services or raise their own taxes to cover the shifted federal costs. The prohibition of CMS from implementing or enforcing eligibility rules for Medicare Savings Programs until October 2034, for instance, could hinder low-income Medicare enrollees from accessing crucial assistance with premiums and cost-sharing.¹³

The most insidious aspect for “Old People” concerning the OBBBA is the potential for statutory Pay-As-You-Go (PAYGO) cuts. If the bill’s substantial spending increases are not offset, the PAYGO act could trigger automatic, across-the-board reductions in mandatory spending, including potentially significant cuts to Medicare.¹⁴ The CBO has indicated that, absent future congressional action, the OBBBA could trigger cuts to Medicare totaling approximately $490 billion from 2027 to 2034.¹⁵ This is the “theft” that deeply concerns you; it’s not a direct pilfering of trust fund assets, but rather a mechanism through which the overall financial burden on the elderly could be exacerbated through reduced benefits and increased out-of-pocket costs.

Addressing the Shortfalls: Legislative Proposals and the Path Ahead

The projected shortfalls demand immediate and decisive legislative action. Ignoring these impending insolvencies is not merely fiscally imprudent but morally reprehensible, especially given the reliance of millions on these programs. Legislators have a panoply of policy levers at their disposal, broadly categorized into revenue enhancements and benefit modifications.

Revenue Enhancements:

• Increasing the Payroll Tax Rate: A common proposal involves a gradual increase in the Social Security payroll tax (currently 12.4%, split between employer and employee). Even a modest increase, phased in over time, could significantly bolster the trust funds.
• Raising or Eliminating the Taxable Maximum: The current cap on earnings subject to Social Security taxes ($168,600 in 2024) could be raised or entirely eliminated. This would subject a larger portion of high earners’ income to the payroll tax, generating substantial additional revenue.
• Taxing All Social Security Benefits: While currently a portion of benefits is taxed for higher-income beneficiaries, proposals exist to tax all benefits similarly to private pension income, thereby increasing general revenue contributions to the trust funds. WTF?
• Dedicated Revenue Streams: Exploring new, dedicated revenue streams, such as a value-added tax (VAT) or a financial transaction tax, could provide additional, stable funding for both programs. This is the European Tax instead of payroll Tax. It’s European and it needs to stay in Europe, but is in PROJECT 2025.

Benefit Modifications:

• Increasing the Full Retirement Age (FRA): Gradually raising the FRA beyond its current schedule (which is already increasing to 67 for those born in 1960 or later) is a frequently debated option.¹⁶ This aims to align the eligibility age more closely with increasing life expectancies. However, this disproportionately impacts individuals in physically demanding jobs or those with shorter life expectancies.
• Adjusting the Cost-of-Living Adjustment (COLA): Modifying the formula used to calculate annual COLAs, perhaps by adopting a “chained CPI” which reflects changes in consumer behavior more accurately, could slow the growth of benefits over time. While this would save money, it would effectively reduce the purchasing power of benefits for retirees. (No. Not Acceptable)
• Progressive Price Indexing: This approach would link benefit increases for higher earners to prices rather than wages, while maintaining wage-indexed increases for lower earners, thereby preserving benefits for those most reliant on Social Security.
• Means-Testing Benefits: Reducing benefits for higher-income retirees is a contentious proposal. While it would target savings from those presumably less dependent on the programs, it fundamentally alters the universal nature of Social Security as an earned benefit. (Not Acceptable)

The current administration, as evidenced by the OBBBA, has indicated a preference for measures that, while not directly altering core benefit structures, could indirectly affect the financial health of these programs and the burden on beneficiaries. The emphasis on “reining in wasteful spending” and “rooting out waste, fraud, and abuse” often translates into policies that increase administrative hurdles or reduce eligibility for some, rather than directly addressing the fundamental actuarial imbalances.

The Real Picture Ahead: A Call to Action

For you, a 71-year-old living on every dollar, the outlook for 2034 is undeniably fraught with peril. The potential for a significant reduction in your Social Security payments due to insolvency, coupled with the rising costs of healthcare and the specter of Medicare benefit cuts, presents an existential threat to your financial security.¹⁷ The confluence of an aging demographic, persistent fiscal imbalances, and legislative actions that, at best, offer indirect and often insufficient solutions, necessitates a profound shift in public discourse and political will.

The “Big Beautiful Bill” may serve as a rhetorical flourish, but its practical implications could be deeply unsettling, particularly if the stated goals of fiscal prudence translate into further erosion of the safety nets for the most vulnerable. The fundamental truth is that maintaining the current benefit structure of Social Security and Medicare without significant revenue enhancements or more substantial benefit adjustments is actuarially unsustainable.

The choices before legislators are stark: raise taxes, cut benefits, or embrace a combination of both. Delaying these difficult decisions merely exacerbates the problem, leading to more drastic and painful adjustments in the future. As an “Old Person” demanding the truth, the truth is this: without robust, bipartisan political courage to enact comprehensive reforms, the current trajectory of Social Security and Medicare portends a future where the promises made to generations of American workers may be increasingly difficult to uphold, leading to a profound and unsettling shift in the financial realities of retirement.

References

1. Board of Trustees, Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. (2025). The 2025 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. U.S. Government Publishing Office.
2. Board of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. (2025). The 2025 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. U.S. Government Publishing Office.
3. Congressional Budget Office. (2025). The Budget and Economic Outlook: 2025 to 2035. CBO.
4. Committee for a Responsible Federal Budget. (2025). OBBBA Would Accelerate Social Security & Medicare Insolvency. Retrieved from https://www.crfb.org/blogs/obbba-would-accelerate-social-security-medicare-insolvency
5. U.S. Census Bureau. (2020). Demographic Turning Points for the United States: Population Projections for 2020 to 2060. U.S. Department of Commerce.
6. American Enterprise Institute. (2025). 2025 Social Security and Medicare Trustees’ Reports: Finances Declining and Worse than Reported. Retrieved from https://www.aei.org/economics/2025-social-security-and-medicare-trustees-reports-finances-declining-and-worse-than-reported/
7. Urban Institute. (2023). Social Security and Medicare Benefits and Taxes: 2023. Retrieved from https://www.urban.org/sites/default/files/2023-10/Social%20Security%20and%20Medicare%20Benefits%20and%20Taxes%202023.pdf
8. Brookings Institution. (2018). The Long-term Impact of Aging on the Federal Budget. Retrieved from https://www.brookings.edu/wp-content/uploads/2018/01/wp405.pdf
9. American Academy of Actuaries. (n.d.). Options for Strengthening Social Security. Retrieved from https://www.actuary.org/wp-content/uploads/2025/05/votingcard_0801.pdf
10. Center for American Progress. (2025). The Truth About the One Big Beautiful Bill Act’s Cuts to Medicaid and Medicare. Retrieved from https://www.americanprogress.org/article/the-truth-about-the-one-big-beautiful-bill-acts-cuts-to-medicaid-and-medicare/

Your request delves into the quantitative dimensions of the Social Security and Medicare insolvency, seeking to ascertain the fiscal magnitude of remediation under different temporal paradigms. This requires a precise understanding of the actuarial deficits and the implications of deferred legislative action.

The Cost of Averting Insolvency at the Eleventh Hour

Should Congress procrastinate until the Social Security and Medicare trust funds enter insolvency, the fiscal exigencies will be substantially more acute, necessitating drastic, immediate, and economically disruptive interventions.

Social Security (OASDI Combined Funds):

As per the 2025 Trustees’ Report, the theoretically combined Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2034.1 At that juncture, continuing program income would be sufficient to pay approximately 81% of scheduled benefits.2 This implies an immediate, across-the-board benefit cut of 19%.3

To prevent this 19% reduction and restore full solvency at the moment of insolvency in 2034, the system would need an instantaneous injection of funds or a permanent increase in revenue equivalent to the shortfall. The 75-year actuarial deficit for Social Security as a whole (OASDI) is currently projected at 3.82 percent of taxable payroll.⁴ This figure represents the immediate and permanent increase in the payroll tax rate, or an equivalent combination of tax increases and benefit reductions, required to bring the system into long-term actuarial balance.

Translating this percentage into a dollar amount at the point of insolvency is complex, as it depends on the total taxable payroll in 2034, which is subject to economic growth and wage inflation. However, the Committee for a Responsible Federal Budget (CRFB) has estimated that the present value of Social Security’s long-term shortfall over 75 years is approximately $26 trillion. If no action is taken until 2034, the amount needed that year alone to cover the shortfall and maintain full benefits would be immense, and it would continue to grow in subsequent years. A rough approximation based on the average annual deficit as a percentage of GDP (which is projected to be around 1.3% of GDP over 75 years) suggests annual interventions in the hundreds of billions of dollars.

For instance, if the average retiree faces a 19% cut in 2034, the typical annual benefit reduction for a couple could be around $17,800.⁵ To prevent this, the system would need to generate that amount per couple, multiplied by the millions of beneficiaries. This would represent an annual fiscal hole of several hundred billion dollars that would need to be filled immediately through tax increases or other revenue streams to avoid benefit cuts.

Medicare (HI Trust Fund):

The Hospital Insurance (HI) Trust Fund, which covers your Part A expenses, is projected to be depleted by late 2033.6 At that point, only about 89% of scheduled benefits would be payable from dedicated revenues, implying an immediate 11% benefit cut.

The 75-year actuarial deficit for the HI Trust Fund is 0.42 percent of taxable payroll.⁷ Similar to Social Security, this represents the permanent increase in the HI payroll tax rate or equivalent measures needed for long-term solvency. The cost to make it solvent at the moment of depletion in 2033 would involve injecting funds equivalent to the 11% shortfall, a figure that would also be in the tens of billions of dollars annually, and potentially growing, given the accelerating healthcare costs. For example, if Medicare’s total gross costs are projected to be around 4% of GDP by 2033, and an 11% shortfall exists, that represents roughly 0.44% of GDP in that year that needs to be covered.

The Cost of Proactive Solvency: Starting in 2029

The economic and social costs of implementing reforms before insolvency are significantly lower and allow for a more gradual, less disruptive calibration of the system. Starting in 2029 would provide a five to six-year lead time before the projected depletion dates.

Social Security (OASDI):

To achieve long-term solvency for Social Security over the next 75 years, the current actuarial deficit of 3.82 percent of taxable payroll needs to be addressed.8 If Congress were to begin implementing changes in 2029, this percentage could be achieved through a phased-in approach. For instance:

• Payroll Tax Increase: A gradual increase of 1.91 percentage points each for the employee and employer (total 3.82 percentage points) over several years would close the gap. Phasing this in over, say, 10 years (from 2029 to 2039) would mean an annual increase of approximately 0.38 percentage points each year. This would represent a relatively minor incremental increase for workers and employers each year, compared to a sudden, large hike in 2034.
• Combination of Measures: Alternatively, this 3.82% of taxable payroll could be achieved by a combination of smaller payroll tax increases, adjustments to the full retirement age, modifications to the COLA formula, or partial means-testing. The benefit of starting early is the flexibility to blend these levers without imposing undue hardship.

The exact dollar amount to “add” each year would depend on the chosen policy mix. However, the present value of the total shortfall is $26 trillion over 75 years. Distributing this financial burden over a longer period, starting earlier, makes the annual fiscal requirement substantially smaller and more manageable. By starting in 2029, the necessary annual contributions or savings would be orders of magnitude less jarring than a crisis-driven response in 2034.

Medicare (HI Trust Fund):

For the HI Trust Fund, the 75-year actuarial deficit is 0.42 percent of taxable payroll.9 Beginning in 2029, this could be addressed by:

• Payroll Tax Increase: A gradual increase in the Medicare payroll tax (currently 1.45% for employees and employers, total 2.9%) by an additional 0.42 percentage points over several years.
• Spending Reductions: The Trustees estimate that a spending reduction of about 8% of HI costs would also achieve solvency. Phasing in these reductions over five years (2029-2033) would mean annual reductions of around 1.6% of HI costs, allowing healthcare providers and beneficiaries time to adapt.

The benefit of early intervention for Medicare is particularly pronounced due to the inherent complexity and resistance to change within the healthcare system. Gradual adjustments allow for more effective implementation and less disruption to care delivery.

The Fiscal Prudence of Preemptive Action

The stark contrast between the fiscal requirements of delayed versus proactive intervention underscores a fundamental principle of actuarial science and public finance: the cost of inaction escalates exponentially. Delaying reforms until the point of insolvency transforms a challenging, but manageable, fiscal rebalancing into an acute fiscal crisis. The political expediency of deferral merely externalizes the true cost onto future generations and, most immediately, onto current and near-future retirees who will face precipitous reductions in their earned benefits.

The “sticker shock” of a sudden 19% cut in Social Security benefits and an 11% cut in Medicare benefits would not only be a profound personal financial calamity for individuals like yourself but would also ripple through the broader economy, dampening consumer spending and potentially triggering a recessionary spiral. The prudent course, from both an economic efficiency and social equity standpoint, is to engage in a deliberative, bipartisan effort now to enact phased reforms that gradually restore the long-term solvency of these indispensable programs, thereby honoring the implicit social contract with the millions of Americans who have contributed to them throughout their working lives.

For Congress to sit on their hands, the 19% insolvency in one and 11% in the other would be an extremely SHOCKING STICKER PRICE in 2034

But how much? What’s your Shock Price? Shock Costs? Old Folks won’t have the means to suddenly come up with a 30% loss. So, you say-Tough being you?

You’ve asked a critical question about the precise dollar amounts needed to offset the projected benefit cuts in Social Security and Medicare if no legislative action is taken until the point of insolvency in 2034 (or 2033 for Medicare HI). While exact future dollar figures involve numerous variables and projections, we can derive credible estimates based on the latest Trustees’ Reports and analyses from leading fiscal policy organizations.

Calculating the Dollar Shortfall in 2034 for Social Security

According to the 2025 Social Security and Medicare Trustees’ Reports, the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds are projected to become depleted in 2034.¹ At that point, incoming tax revenues would only be sufficient to pay approximately 81% of scheduled benefits, meaning a 19% across-the-board benefit cut.²

To determine the dollar amount of this 19% shortfall, we need an estimate of the total annual benefits paid by Social Security in 2034. While the Trustees’ Report provides detailed long-term projections in terms of percentage of GDP or taxable payroll, translating this into a specific nominal dollar figure for a future year like 2034 requires some estimation based on projected economic growth and benefit outlays.

Based on projections from the Congressional Budget Office (CBO) and other analyses of the Trustees’ Reports:

• Total Social Security Outlays: Social Security outlays (benefits paid) are projected to increase significantly by 2034 due to the aging population. In 2024, total Social Security benefit payments were approximately $1.3 trillion. If we project a conservative annual growth rate (reflecting inflation and new retirees), by 2034, total annual benefits would likely be in the range of $1.8 trillion to $2.0 trillion. (This is an approximation based on historical growth and general economic projections; the precise figure for 2034 would be in a future Trustees’ Report).
• 19% Shortfall: If the total projected benefits in 2034 are, for example, $1.9 trillion, then a 19% shortfall would amount to:0.19×$1.9 trillion=$361 billionThis means that, if nothing is done, approximately $361 billion would be the immediate annual shortfall in Social Security payments in 2034 that would need to be covered to avoid the 19% benefit cut. This annual deficit would continue to grow in subsequent years without further intervention.

Calculating the Dollar Shortfall in 2033 for Medicare (HI)

The Medicare Hospital Insurance (HI) Trust Fund (Part A) is projected to be depleted in late 2033. At that point, it would be able to pay only 89% of scheduled benefits, implying an 11% reduction.

Similar to Social Security, we need to estimate the total annual expenditures for Medicare Part A in 2033.

• Total Medicare Part A Outlays: In 2024, Medicare Part A benefit payments were approximately $416 billion. Given the accelerating healthcare costs and the aging population, total Part A outlays are projected to continue growing. Projections indicate that total Medicare outlays (all parts) will increase substantially. KFF (Kaiser Family Foundation) projects net Medicare outlays to increase from $839 billion in 2023 to over $1.7 trillion in 2034. While this is for all of Medicare, Part A is a significant component. If we consider Part A’s historical share and projected growth, it could be in the range of $550 billion to $600 billion by 2033.
• 11% Shortfall: If total projected Part A benefits in 2033 are, for example, $580 billion, then an 11% shortfall would amount to:0.11×$580 billion=$63.8 billionTherefore, to prevent the 11% benefit cut, approximately $63.8 billion would be the immediate annual shortfall for Medicare Part A in 2033 that would need to be funded. This annual deficit would also escalate in subsequent years.

Summary of Immediate Annual Dollar Shortfalls (Approximated)

• Social Security (OASDI) in 2034 (19% cut): Approximately $360 – $380 billion per year
• Medicare (HI) in 2033 (11% cut): Approximately $60 – $70 billion per year

These figures represent the annual amount that would be needed at the moment of insolvency to avoid the projected benefit cuts and fully fund scheduled benefits for that year. It’s crucial to understand that these are immediate, snapshot figures for the year of insolvency. The total long-term deficit (over 75 years) for each program is much larger, as previously noted in terms of trillions of dollars in present value. The purpose of these calculations is to convey the sheer magnitude of the fiscal shock if policymakers wait until the last possible moment.