Medicare Part B is built to never run out of money

Medicare has two trust funds, and only one of them can run dry.▸ The Hospital Insurance fund that pays for Part A is financed by a payroll tax fixed in law — if spending outruns that tax, the fund depletes, which the 2026 Medicare Trustees Report projects will happen in 2033, cutting payable benefits to 89% that year. Part B works differently, on purpose. Its premiums and its federal subsidy are not fixed at all — both are recalculated every year to exactly cover whatever Part B is projected to cost. There is no depletion date because there is no fund to deplete. The corresponding bill just arrives, automatically, every January.

By law, the standard Part B premium is set at 50% of the projected monthly cost of covering an aged enrollee — which comes out to roughly 25% of the program's total per-enrollee cost — and general revenue from the U.S. Treasury automatically fills in the rest.▸ In calendar year 2025, that formula produced $150.7 billion from beneficiary premiums (26% of Part B's $580.5 billion in income), $422.9 billion transferred in from general revenue (73%), and $6.8 billion from trust fund interest and other income (1%). None of that money is voted on each year — it moves because the statute says it must.

The spending side has its own imbalance.▸ Of $584.3 billion in total Part B expenditures, $321.3 billion — 55 cents of every dollar — went to private Medicare Advantage insurers, who are paid a flat per-enrollee rate and then handle claims themselves. Physicians billing Medicare directly through the fee schedule received $72.4 billion — 12 cents. The remaining third covers hospital outpatient care, home health, and other fee-for-service benefits. The typical enrollee's Part B coverage cost the program an average of $9,117 that year, across 63.4 million aged and disabled beneficiaries.

Because the formula is automatic, so is the increase.▸ The standard premium rose from $185.00 in 2025 to $202.90 in 2026 — a 9.7% jump, per the CMS/SSA notice setting the 2026 Part B premium and deductible rates, which also set the 2026 annual deductible at $283, up from $257. It is not the largest one-year jump this decade — that was 2022's 14.5% increase, tied partly to anticipated spending on a single new Alzheimer's drug that never materialized at scale, which the program partially reversed with 2023's rare 3.1% decrease. But 2026 is the second-largest increase since, and the Trustees' own intermediate projection has the premium climbing again to $209.50 in 2027.

A second automatic mechanism sits on top of the standard premium.▸ Since 2007, beneficiaries whose income exceeds a threshold — $109,000 for an individual filer in 2026, $218,000 for a joint return — pay an income-related monthly adjustment amount, or IRMAA, calculated so their premium covers 35%, 50%, 65%, 80%, or 85% of Part B's per-enrollee cost instead of the standard 25%. At the top bracket, an individual earning $500,000 or more pays $689.90 a month — more than three times the standard premium — under the same 2026 rate notice.

Because the income thresholds are indexed to inflation while incomes and asset income keep growing, the population caught above them grows too.▸ The 2026 Trustees Report counts 5.1 million beneficiaries who paid a Part B income-related premium in 2025, collectively contributing $14.1 billion beyond the standard premium. For 2026 the Trustees estimate 6.1 million beneficiaries will pay the surcharge — a jump of one million people in a single year — contributing an estimated $18.8 billion, a 33% increase in surcharge revenue on a 20% increase in the number of people paying it.

All Part B dollar and enrollment figures are calendar-year 2025 actuals or the Trustees' 2026 current-year estimates, per the 2026 Medicare Trustees Report; the income side of the flow chart above sums to $580.4B against the Report's independently rounded $580.5B total. IRMAA income thresholds shown are for individual filers only; joint-filer thresholds are exactly double.