Most federal employees spend years planning for retirement around one major government program: Social Security. But according to a new analysis from the Center for Retirement Research at Boston College, Medicare may deserve just as much attention — if not more.
The report, based on the 2026 Medicare Trustees Report, argues that many people are focused on the wrong issue. Headlines often center on when Medicare’s Hospital Insurance (Part A) trust fund could be depleted. Author Alicia H. Munnell says the larger concern is that Medicare is becoming an increasingly expensive program for both taxpayers and beneficiaries, with costs projected to grow faster than Social Security over the coming decades.
For federal employees and retirees, that’s worth paying attention to because Medicare plays a central role alongside the Federal Employees Health Benefits (FEHB) Program after retirement.
Medicare Is Already a Huge Federal Program
The report notes that Medicare already accounts for roughly 14 percent of the federal budget and more than one-fifth of all national healthcare spending. Under current projections, Medicare spending is expected to exceed Social Security spending within about 11 years. That doesn’t necessarily mean Medicare benefits are in immediate danger. Instead, it means healthcare costs are consuming a larger share of both the federal budget and the overall economy.
The Trust Fund Isn’t the Whole Story
Many news stories focus on Medicare Part A because it is financed through a trust fund supported primarily by payroll taxes.
The Trustees currently project that the Hospital Insurance trust fund would become depleted during 2033. Even then, Medicare would not disappear. Ongoing payroll tax revenue would still be sufficient to pay most scheduled Part A costs, although not all of them unless Congress acts. The report argues that this issue receives disproportionate attention.
Parts B and D — the parts of Medicare that pay for physician services, outpatient care, and prescription drugs — are automatically financed each year through a combination of beneficiary premiums and general federal revenues. As costs increase, those funding sources increase as well. The result is growing pressure on both taxpayers and Medicare beneficiaries through higher premiums.
Why This Matters to Federal Employees and Retirees
Most federal retirees who keep FEHB eventually enroll in Medicare Part A, and many also elect Medicare Part B — a coordination question that falls outside the scope of the Trustees’ report itself but is central to how these findings play out for federal retirees specifically. Before making that decision, it’s worth reviewing current FEHB premium rates for your plan alongside your expected Part B costs.
While FEHB can significantly reduce out-of-pocket medical expenses, it does not shield retirees from increases in Medicare Part B premiums or from Income-Related Monthly Adjustment Amount (IRMAA) surcharges for higher-income retirees. In other words, rising Medicare costs don’t necessarily reduce your FEHB benefits, but they can increase the amount you pay to participate in Medicare. That makes Medicare costs an important part of retirement income planning alongside TSP withdrawal strategy, Social Security claiming decisions, and required minimum distributions.
Medicare Advantage Continues to Grow
Another notable trend highlighted in the report is the rapid growth of Medicare Advantage.
The report estimates that Medicare Advantage now represents nearly half of Medicare spending, and enrollment continues to increase. Munnell argues that Medicare Advantage plans currently receive payments that exceed the cost of covering similar beneficiaries in traditional Medicare, according to estimates from the Medicare Payment Advisory Commission, contributing to overall program costs. For retirees deciding between traditional Medicare and Medicare Advantage, those broader policy debates may eventually influence future reforms, although no immediate changes are proposed.
Healthcare Costs Remain the Bigger Challenge
Perhaps the report’s most striking conclusion is that Medicare’s financial pressures stem less from population aging than from the overall cost of healthcare in the United States. The author notes that U.S. healthcare spending consumes nearly twice the share of GDP as the average among other developed countries, driven largely by higher prices rather than greater use of medical services. If those trends continue, Medicare spending is likely to keep rising regardless of how Congress addresses the Part A trust fund.
What Federal Employees Should Watch
The report is not predicting an immediate reduction in Medicare benefits. Instead, it suggests that policymakers will likely face increasing pressure to control healthcare costs while preserving access to care.
For federal employees approaching retirement, that reinforces several long-term planning considerations:
- Expect Medicare premiums to remain an important part of your retirement budget.
- Remember that large taxable income events — such as sizable Traditional TSP withdrawals or Roth conversions — can increase Medicare costs through IRMAA.
- Continue evaluating how FEHB and Medicare work together before making enrollment decisions.
- Watch future Medicare legislation closely, particularly proposals affecting Medicare Advantage, provider payments, and beneficiary premiums.
The Bottom Line
For years, discussions about federal retirement have focused primarily on Social Security’s finances. The new research argues that Medicare deserves equal attention — not because the program is about to run out of money, but because healthcare costs continue to rise faster than the economy itself.
For federal retirees, the takeaway isn’t to worry about losing Medicare coverage. It’s to recognize that healthcare expenses, Medicare premiums, and IRMAA are likely to remain major pieces of retirement planning for years to come.
Official Resources
- Medicare Finances: A Perspective on the 2026 Trustees Report — Center for Retirement Research at Boston College, Issue in Brief No. 26-14
- Medicare.gov — official U.S. government site for Medicare enrollment and coverage information
- OPM: Healthcare Insurance — official guidance on FEHB and how it coordinates with Medicare
- Social Security Administration: Medicare Premiums and IRMAA — how income affects your Part B and Part D premiums
- Medicare Payment Advisory Commission (MedPAC) — independent Congressional agency analyzing Medicare Advantage and provider payment issues
Source: Alicia H. Munnell, “Medicare Finances: A Perspective on the 2026 Trustees Report,” Center for Retirement Research at Boston College, Issue in Brief No. 26-14, July 2026.