Trump’s $90 Medicare Checks Will Undermine The Program They Claim To Protect

A few weeks ago, I wrote about how President Trump’s decision to send rebates to some Obamacare customers represented sound policy. His more recent announcement about Medicare rebates to seniors, not so much.

While the Obamacare rebates represented a refund of user fees that the Obamacare enrollees themselves had paid, the Medicare rebates instead comprise general taxpayer dollars — in other words, a shift of cash from the young to seniors. More importantly, Medicare faces major financing challenges in the next few years, such that spending — as opposed to saving — more cash on the program will further undermine its solvency.

Explaining the ‘Slush Fund‘

In a social media post announcing the move, the president said the checks of $90 each, paid out to about 21 million seniors, would “come from the Medicare Improvement Fund (MIF), a pointless ‘Slush Fund.’” That oversimplifies matters slightly, as the MIF represents a cross between a “slush fund” and a checking account.

Congress created the fund in 2008, and since then has used it to “park” budgetary savings from health care legislation. Practically every year — more often, several times a year — Congress passes measures extending various mandatory health spending programs, ranging from changes to Medicare physician payments (aka the “doc fix”) to spending on community health centers.

In most cases, lawmakers reduce spending elsewhere to pay for the new disbursements. But the sums don’t always align precisely. To use a hypothetical example, assume Congress wants to pass a “doc fix” that would cost $5 billion, but the policies used to pay for this new spending would generate $6 billion in savings.

That’s where the MIF comes in. Congress would “park” the additional $1 billion in savings (i.e., $6 billion in savings minus $5 billion in “doc fix” spending) in the fund, which it could then use to help finance the next “doc fix,” or some other health care spending provision that lawmakers want to fund in the future.

Essentially, the MIF smooths out the effects of Congressional Budget Office (CBO) scorekeeping on health care legislation, or at least Congress has used it that way for nearly the past two decades. (A separate Medicaid Improvement Fund, also established in 2008, serves a similar purpose for that program.) As a CBO report from 2023 noted, Congress has made frequent use of the mechanism over the past decade-plus. As the president noted, the biggest transfer out of the MIF was over $20 billion as part of Obamacare —j ust part of the raid on Medicare used to fund that new entitlement.

Up until this point, no administration had actually spent money out of the MIF, likely because of the unspoken but shared assumption between Congress and presidents that the money was a short-term place to “park” savings. But the Trump Administration obviously did not consider itself a party to this tacit agreement. And when just over $2 billion in MIF funds became available for disbursement last Thursday (i.e., October 1, the beginning of Fiscal Year 2027), the president announced his rebate gambit.

Misguided Policy

On many different levels, using $2 billion from the MIF to send payments to seniors doesn’t make much policy or political sense. For starters, the text of the law specifies that the fund should “make improvements under the original Medicare fee-for-service program under parts A and B … including adjustments to payments for items and services furnished by providers of services and suppliers under such original Medicare fee-for-service program.” Does sending out checks to seniors a few weeks before an election accomplish these objectives? In a word, no.

Second, because the statutory text says the MIF applies to the “original Medicare fee-for-service program,” seniors enrolled in Medicare Advantage plans — which enroll the majority of seniors— can’t qualify for the rebates. (Seniors with higher incomes who are subject to means-tested premiums, or with low incomes whose premiums are paid by state Medicaid programs, also won’t receive them.)

So what’s the point of hyping up checks that most seniors won’t receive? This gambit has echoes of the $250 rebate checks for seniors in the Medicare prescription drug “doughnut hole” that Democrats added to Obamacare in an attempt to offset political criticism of the law before the 2010 midterm elections. I worked on Capitol Hill at the time, and Republican staff generally mocked the rebates as going to a small portion of seniors, and insufficient to offset Obamacare’s massive disruptions. (This year’s rebates will go to more seniors, but provide a smaller cash amount than the 2010 payments.)

Third, as noted above, whereas Trump’s earlier rebates to those who enrolled in exchange plans represented a refund of excess “user fees” that the enrollees themselves paid in, the Medicare funds in the MIF come from a combination of payroll taxes and general government revenues.

In other words, the payments represent yet another wealth transfer from younger generations to seniors. And contrary to popular opinion, no, this isn’t a case where seniors had “earned” this payment. The average senior gets far more out of the Medicare program than they ever “paid in” — a situation that the rebates will only make worse.

Insolvent Program

Lastly, and most importantly, Medicare is functionally insolvent, and has been for roughly a decade. Just before Obamacare’s passage, the Medicare trust fund was projected to become insolvent by 2017. Only Obamacare’s phony accounting — whereby the Obama Administration claimed that the same money was both paying for Obamacare and extending the life of the Medicare trust fund — has staved off the program’s insolvency, at least on paper.

Because of Medicare’s poor financial condition, lawmakers should be looking to reduce program spending and improve its solvency in every bill they pass. They shouldn’t be “parking” savings in the MIF so they can turn around and spend those savings later.

Trump’s rebate gambit did expose the gimmick behind the MIF. But, contrary to his claim, sending out checks to a program that can barely keep the lights on won’t “protect and preserve Medicare.” It will undermine it further.