The Medicare Trustees have issued an annual report on the financial status of the Medicare program for this year and what may be in store for its viability moving forward.

An analysis by KFF said the banner headline from the report is that the trustees predict the Medicare Part A trust fund will be depleted in 2033, the same year but one quarter earlier than last year’s projection.

In addition to discussing the status of the Part A trust fund, the report also provides details on federal spending for Medicare Part B and Part D benefits, the distribution of spending for traditional Medicare and Medicare Advantage, and revenue sources for Medicare, along with updated spending and revenue projections and a detailed discussion of factors that have contributed to changes in the program’s financial outlook, KFF said.

For SNFs, the most interesting part of the report and the analysis may be that skilled nursing consumed 6 percent of the spending pie for Part A. Looking at spending by type of service in traditional Medicare, the single largest category of benefit spending in 2025 was for inpatient hospital services covered under Part A (spending by type of service for Medicare Advantage enrollees is unavailable).

Although a relatively small share of beneficiaries use inpatient hospital services, these services accounted for roughly one-third of total benefit spending in traditional Medicare ($159 billion or 33 percent), followed by outpatient hospital services covered under Part B ($76 billion or 16 percent).

“This means that combined spending on hospital services [both inpatient and outpatient] accounted for nearly half of spending on Part A and Part B benefits in traditional Medicare in 2025. Services covered under the Medicare Part B physician fee schedule accounted for $71 billion [15 percent], and the remaining $174 billion [36 percent] consisted of payments for all other Part A and Part B services, including physician-administered drugs [8 percent], skilled nursing facility services [6 percent], and hospice care [6 percent], among others,” KFF said.

Other Highlights

• In 2025, Medicare benefit payments tallied $1.2 trillion, up from $666 billion a decade earlier. Spending on Part B services (including physician services, outpatient services, and physician-administered drugs) accounts for the biggest share of Medicare benefit spending (48 percent in 2025), as it has since 2015.

• Spending on Part A services (including inpatient hospital services, skilled nursing facility services, and hospice care) has declined as a share of Medicare benefit spending (from 43 percent in 2016 to 37 percent in 2025).

• The decline, KFF said, is driven in part by a shift of some services from inpatient to outpatient settings reflecting changes in practice patterns, along with increases in spending on services covered under Part B, including high-cost physician-administered drugs.

• Spending on Part D prescription drugs has accounted for a relatively constant share of Medicare benefit spending for the brunt of the past decade (12-13 percent) but rose to 15 percent in 2025 and is projected to continue growing in the coming years.

Trust Fund Depletion

KFF said the depletion of the reserves in the Medicare Hospital Insurance (Part A) trust fund, which pays for inpatient hospital, skilled nursing facility, home health, and other Part A services, is expected in the second quarter of 2033, based on the latest projections from the Medicare Trustees.

“This is one quarter earlier than the projection in last year’s report. According to the Medicare Trustees, the earlier depletion date is primarily the result of updated estimates of Social Security tax revenue [one source of Part A funding] that are lower than previously projected due to changes in the 2025 budget reconciliation bill (H.R. 1),” the analysis said.

If the reserves in the Part A trust fund are fully depleted, Medicare would not have sufficient funds to cover Part A benefit spending for the full year without additional revenues or reductions in spending on benefits or payments to providers, KFF added.

Questions or comments on this article? Contact Patrick Connole at pconnole@parkplacelive.com.