Medicare Financial Status, Budget Impact, and Sustainability—Which Concept is Which?

Medicare is continually undergoing change, as it must in order to reflect advances in medical technology, new health care delivery systems, financial pressures, and other developments. Modifications to the program are debated by policymakers in Congress and the administration, together with academic experts and others. These debates would be improved if policymakers and the public had a clearer understanding of Medicare and certain commonly cited views of the program's overall status. Three such concepts--the financial status of the Medicare trust funds, the impact of Medicare on the Federal budget, and the long-run sustainability of Medicare--are often confused with each other and are sometimes used interchangeably. Each concept is important but needs to be used for its own purpose. This article clarifies the differences among these three views of Medicare and provides examples of each.