AEI Political Insights from the 2026 Social Security and Medicare Trustees Reports

AEI Political Insights from the 2026 Social Security and Medicare Trustees Reports

WASHINGTON, D.C. -The American Enterprise Institute (AEI) shed light on the Part D financial burden highlighted in the 2026 Social Security and Medicare Trustees reports. Medicare Part D expenditures have been revised upward by the Congressional Budget Office (CBO), calling into question both the declining fiscal health of Medicare and the ability of CBO to accurately score major pieces of legislation.

WORD ON THE STREET

From AEI:

For Medicare, the Trustees provide current information and projections on all parts of the program, including Part D, the prescription drug benefit. Part D is financed by beneficiary premiums and mainly by state and federal contributions. In 2022, Congress made the drug benefit significantly more generous, completely closing the so-called doughnut hole in coverage and replacing it with a $2,000 annual out-of-pocket cost cap, among other changes. These changes, beginning in 2024 and 2025, raised program costs. By capping premium increases at 6 percent per year, they largely shielded beneficiaries from the large increases that would otherwise have occurred under the law requiring premiums to cover 25.5 percent of costs. The Biden Administration also created a three-year "demonstration project", of dubious legality and without Congressional authorization, that funneled funds to stand-alone Part D plans to keep premium increases low. Yet to contain the budget score for this expansion, Congress imposed a floor, beginning in 2030, requiring premiums to finance 20 percent of program costs going forward.

THE BOTTOM LINE

According to the Medicare Trustees report, the Hospital Insurance Trust Fund, which funds Medicare's Part A benefit, will become insolvent in the second quarter of 2033. By then, it will be able to fund 89 percent of scheduled benefits.

Equally concerning as the pending insolvency of Part A, Medicare Part D cost growth puts unsustainable pressure on the federal debt. The upwardly revised Medicare Part D expenditures in the report, highlighted by AEI, further emphasize the fact that Medicare is running at a fiscally unsustainable level. The House Budget Committee has led in ensuring that CBO accurately forecasts future costs in Medicare so legislators can make informed funding decisions to protect the future of the program.

Last month, House Budget Committee Chairman, Jodey Arrington (R-Texas), along with House Ways and Means Committee Chairman Jason Smith (R-Mo), and House Energy and Commerce Committee Chairman Brett Guthrie (R-Ky), wrote a letter to the Congressional Budget Office (CBO) regarding concerning technical changes in the Budget and Economic Outlook: 2026 to 2036, specifically on the dramatic upward revision of Medicare Part D expenditures.

• Medicare is one of the largest drivers of our federal debt. CBO increased its projections for Medicare spending by $1 trillion in this year's baseline compared to 2025. Factors include increases in fee-for-service spending and increased Part D costs.
• CBO originally estimated that the Medicare drug price negotiation and Part D redesign provisions in Democrat's so-called Inflation Reduction Act's would reduce the deficit by $129 billion.
• Instead, Part D spending has ballooned. In this baseline, CBO increased its Medicare Part D spending projections by $600 billion since just last year, with Democrat's policies as the culprit.