According to a blog posted by the nonpartisan Congressional Budget Office (CBO) on February 23, 2026, the 2025 Budget Reconciliation Act (HR 1) will speed up the insolvency of the Medicare Hospital Insurance Trust Fund by 12 years due to the law’s reduction in tax rates and temporary deductions for those 65 and older. This means Medicare could stop paying full Medicare Part A payments to providers by 2040.

The trust fund pays for benefits under Medicare Part A, which covers inpatient hospital services, skilled nursing facility stays, home health care, and hospice care. The majority of the funding comes from Medicare payroll taxes and Social Security benefit taxes.

This is a stark revision from CBO’s estimate in 2025 which stated the trust fund would not be able to pay full benefits beginning in 2052. If this were to happen, and the trust fund was depleted by 2040, total benefits would need to be reduced by 8% in 2040 to 10% in 2056. According to CBO, the decision on how to make those reductions would be left to the Centers for Medicare and Medicaid Services.

Two other factors were cited in the sped-up timeline for insolvency: reduction in payroll taxes from projections of lower earnings and lower interest income from the trust fund.

While overall taxes contributed to the trust fund are being reduced, spending of the trust fund is also increasing. CBO found that overall spending on Medicare beneficiaries is projected to increase due to per enrollee spending in 2025 Part A fee-for-service Medicare along with higher Medicare Advantage plan bids in 2026.