Hospital Insurance Trust Fund: Medicare Part A

By
Julia Kagan
Julia Kagan
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Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

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Updated May 17, 2023
Reviewed by Eric Estevez
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Suzanne Kvilhaug
Suzanne Kvilhaug
Fact checked by Suzanne Kvilhaug
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Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.
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What Is the Hospital Insurance Trust Fund?

The Federal Hospital Insurance Trust Fund is also known as Part A of Medicare, the health insurance program for people aged 65 and older in the United States. The program is financed through payroll taxes from current workers and employers and taxes on Social Security benefits.

This trust fund is overseen by a board of trustees that reports annually regarding its financial status. Due to changes in legislation and demographics in the United States, the fund is projected to be depleted in 2031.

Key Takeaways

  • The Federal Hospital Insurance Trust Fund is Part A of Medicare and covers hospital stays, hospices, and skilled nursing facilities.
  • The Fund is something that every worker pays into, then benefits from at retirement.
  • Given changing demographics and regulations, the trust fund is expected to be depleted by 2031.

Understanding the Hospital Insurance Trust Fund

The Hospital Insurance Trust is funded by revenue from Social Security benefits and payroll taxes from all workers in the United States, not just from beneficiaries. The program is something all workers pay into and then benefit from when they reach retirement age or are unable to work due to disability. Medicare Part A helps pay for inpatient hospital services, hospice care, skilled nursing facility, and home health services.

Medicare Benefits

Managed by the U.S. government, the Federal Hospital Insurance Trust Fund or Medicare Part A pays for healthcare services like hospital stays and hospice care for Medicare recipients. Medicare is a government-funded health insurance program for those 65 and older, disabled people, and people with certain health conditions specified by the government.

Medicare Parts B, C, and D pay for healthcare services not covered by the hospital insurance trust fund, such as doctor visits, lab tests, and prescription drugs, and are funded through premium payments from beneficiaries.

The Initial Enrollment Period to apply for Medicare lasts for seven months, starting three months before enrollees turn 65 and ending three months after the month they turn 65.

Funding the Hospital Insurance Trust Fund

Analysts are concerned that the U.S. economy will not support the hospital trust within Medicare in the future because of changes in population demographics as the birth rate decreases and people live longer.

According to the 2023 report from the Social Security and Medicare Boards of Trustees, it is projected that the Hospital Insurance Trust Fund will be able to pay 100% of total scheduled benefits until 2031, after which the fund’s reserves will be depleted and continuing program income will be sufficient to pay 89% of benefits. 

The estimates are based on several factors, including utilization rates of skilled nursing facilities, overall levels of worker productivity, and recent trends in healthcare costs relative to individual incomes.

How Much Does Medicare Part A Cost?

For those who receive benefits from the Hospital Insurance Trust Fund, or Medicare Part A, most people don’t pay a Part A premium because they paid Medicare taxes while they were employed. However, those who don't qualify for free Part A may pay up to $506 each month. 

How Do I Know What Benefits I Can Receive From Medicare?

To understand the benefits and costs of Medicare Part A, individuals can visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227). 

Will the Hospital Insurance Trust Fund Be Depleted by 2031?

According to the 2023 report from the Social Security and Medicare Boards of Trustees, it is projected that the Hospital Insurance Trust Fund will be able to pay 100% of the total scheduled benefits until 2031. However, the Congressional Budget Office projects the Fund will be solvent until 2033.

The Bottom Line

The Federal Hospital Insurance Trust Fund is also known as Medicare Part A, part of the United States health insurance program for those 65 and older. The Fund pays for healthcare services like hospital stays and hospice care for Medicare recipients. It is overseen by a board of trustees and is projected to be depleted in 2031.

Article Sources
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  1. U.S. Centers for Medicare & Medicaid Services. "How Is Medicare Funded?"

  2. U.S. Centers for Medicare & Medicaid Services. "Trustees Report & Trust Funds."

  3. Social Security Administration. "A Summary of the 2023 Annual Reports."

  4. U.S. Centers for Medicare & Medicaid Services. "What Part A Covers."

  5. U.S. Centers for Medicare & Medicaid Services. "What's Medicare?"

  6. U.S. Centers for Medicare & Medicaid Services. "Diagnostic Laboratory Tests."

  7. U.S. Centers for Medicare & Medicaid Services. "How Do Medicare Advantage Plans Work?"

  8. Medicare.gov. "When Does Medicare Coverage Start?"

  9. National Institutes of Health. "The 2030 Problem: Caring for Aging Baby Boomers."

  10. U.S. Department of the Treasury. "Fact Sheet: 2023 Social Security and Medicare Trustees Reports."

  11. U.S. Centers for Medicare & Medicaid Services. "2023 Medicare Costs."

  12. American Hospital Association. "Hospital Insurance Trust Fund Solvent Until 2031, Medicare Trustees Project."