President Donald Trump came into office pledging to protect Social Security and Medicare. And the President has not made any direct cuts to the programs, in keeping with his promise.
However, the passage of the One Big Beautiful Bill Act (OBBBA) could have a detrimental impact on both programs. While many people are already aware that changes to the tax code in the OBBBA have caused Social Security’s already-precarious finances to worsen, a new analysis from the Committee for a Responsible Federal Budget has also revealed that Medicare’s financial stability is being impacted as well.
Here’s how the One Big Beautiful Bill Act has affected Medicare
According to the Committee for a Responsible Federal Budget, the passage of the OBBBA is directly responsible for increasing the shortfall in Medicare’s trust fund by 0.09% of payroll.
The Medicare trust fund pays for Part A coverage, which is the part of Medicare that pays for inpatient hospital stays. The trust fund is expected to be depleted after the second quarter of 2033. This is three months earlier than the estimated depletion date in the projections from last year. In 2033, the trustees expect to collect only enough revenue to cover 89% of the costs associated with Part A. This will gradually increase over time, and the fund will be able to cover 93% of hospital expenses by 2100.
Since retirees rely on Medicare to pay for the care they need as they age, the depletion of the trust fund is dire news for retirees, especially those with medical concerns.
Why the One Big Beautiful Bill Act contributed to destabilizing Medicare’s finances
OBBBA Act has had a detrimental financial impact on both Medicare and Social Security. However, its effects on retirement benefits have been more widely publicized, especially in light of a Congressional Budget Office report in February showing the Social Security trust fund reserves were likely to be depleted in 2032. At the time, this was an earlier estimate of the trust fund’s depletion than the most recent trustees’ report. With the release of the June 9, 2026, trustees’ report, the CBO and Social Security trustees’ projections are now in alignment.
Both Medicare and Social Security are affected by the same change to the law: The introduction of new tax breaks for retirees. Specifically, through 2028, seniors 65 and over are entitled to an additional $6,000 per person deduction, or a $12,000 deduction for married couples. While there is an income cap on who can claim the deduction, it stacks on top of pre-existing opportunities for retirees to reduce taxable income, including the standard deduction and the additional $2,000 deduction available to older Americans. The new $6,000 deduction is also available to those who itemize on their taxes, as well as to those who claim the standard deduction.
While the $6,000 deduction is temporary and didn’t actually change Social Security’s tax rules, it has the effect of substantially reducing the number of retirees subject to federal tax on Social Security benefits.
Social Security’s longstanding tax rules have shielded seniors from tax on Social Security benefits until their provisional income (half of all Social Security benefits plus all taxable income and some non-taxable income) exceeds $25,000 as a single tax filer or $32,000 as a married joint filer. Because the deduction brings the taxable income of many Americans below these limits, tax revenue collected on benefits has been reduced dramatically. In fact, the White House now estimates that 88% of all seniors who receive Social Security now pay no tax on their Social Security benefits.
Unfortunately, Medicare (and Social Security) can’t really afford to lose all this revenue when there are already shortages. So, while the tax savings may be helpful to seniors, the tax cuts could end up costing retirees more in the end if they undermine the financial solvency of programs retirees depend on.
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