On July 30, Medicare will mark its 60th birthday. Like many 60-year-olds, it's in the throes of a midlife crisis.
But unlike a harmless convertible purchase or spontaneous trip to Paris, this one midlife crisis threatens the nation's fiscal health -- and the well-being of future retirees.
Medicare was signed into law in 1965 as part of President Lyndon Johnson's "Great Society" program to provide seniors access to affordable medical care in their golden years. At the time, the commitment seemed manageable. The program's budget in its first year was roughly $10 billion.
Sixty years later, it costs over $1 trillion annually.
The demographics are concerning. More than 68 million Americans -- roughly one in five -- are enrolled in Medicare today. In less than a decade, that number will exceed 78 million.
By 2050, one in four Americans will be 65 or older. Medicare's trustees project that the Part A hospital insurance trust fund will be insolvent by 2033.
The problem is simple. Medicare operates a bit like a Ponzi scheme. Workers may think that their payroll taxes are being put away to cover their Medicare benefits when they retire. But that's largely an accounting fiction. With each passing year, there are fewer workers to pay into Medicare's trust fund and support beneficiaries today. That dynamic strains the program's foundation.
Beneficiaries are also living longer than ever -- nearly 20 more years after hitting 65. That's good news for seniors and their families. But it makes Medicare's math much more challenging.
A 2020 retiree received around $176,500 more in Medicare benefits than they paid in taxes toward the program. By 2030, that gap is set to grow to nearly $250,000.
That imbalance isn't just unfair. It's unsustainable.
Fixing Medicare doesn't require slashing benefits or abandoning the elderly. But it does require rethinking the program's one-size-fits-all structure and targeting resources more wisely.
Start with means-testing. Only the wealthiest 8% of enrollees in the Medicare Part B medical insurance benefit pay higher premiums. Even then, they're still heavily subsidized. In 2024, the income threshold for paying more kicks in at $103,000 for individuals and $206,000 for couples. These are not struggling seniors. They can afford to contribute more -- and they should, not just for Part B and the Part D prescription drug benefit, but for Part A, too.
Next, raise the eligibility age. When Medicare began, life expectancy was about 70. Today, it's 78. Yet the eligibility age has remained at 65. Updating that number to reflect modern longevity would ease financial strain while preserving the safety net for those who truly need it.
And perhaps most important, it's long past time to bring market forces to Medicare. Medicare Advantage -- the part of the program that lets seniors choose privately administered health plans for their coverage -- now covers more than half of all enrollees. These plans consistently deliver similar or better care at lower cost.
In 2024, Medicare Advantage plans submitted bids that averaged 18% below what traditional Medicare would be expected to spend on the same beneficiaries -- the lowest relative bid on record.
We should take that model of choice and competition and extend it across the entire program. For example, instead of having the government run the whole show, we could give seniors a fixed amount to shop for the coverage that works best for them -- public or private. This is called a "premium support" model, and evidence suggests it'd lead to more choice, increased competition, and lower costs. Former Congressional Budget Office director Douglas Holtz-Eakin estimates it could save taxpayers $1.8 trillion over the next decade.
And we can't ignore the rampant waste. The federal government admits that Medicare makes around $50 billion in improper payments each year. The real number could well be higher. That's money that could be going to care for patients. Reforming audits, harmonizing payment rates, and holding plans accountable are all essential steps to cleaning up the program.
For 60 years, Medicare has grown bigger. Now it needs to grow smarter so that it can meet the needs of seniors -- and taxpayers -- for the next 60 years.
Because without reform, Medicare may not make it to age 70.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy -- and How to Keep It (Encounter 2025). Follow her on X @sallypipes.