Recent analysis from the Congressional Budget Office suggests that Medicare spending is set for significant cuts in the next decade, following the passage of President Trump’s major tax laws last month—and this might happen without any action from Congress.
Nonpartisan budget analysts calculated that substantial overall cuts to the federal program could be triggered as a direct result of Trump’s “big beautiful bill,” which was enacted in 2010 under the Obama administration. This law, known as Paygo, requires that any new legislation be budget-neutral, imposing automatic reductions—or “quarantine”—to manage excessive costs.
Historically, Congress has consistently sidestepped these cuts, regardless of whether the administration was Republican or Democrat. The CBO pointed out in a June letter that between the law’s inception and now, no cuts have ever actually been enforced.
That said, a recent analysis conducted in light of Democratic requests indicated that if Congress remains inactive, the CBO might need to issue a “quarantine order” two weeks after the current Congressional session ends, which would necessitate a $41.5 billion reduction in spending for fiscal year 2026.
The estimates show that Medicare spending cuts could reach around $45 billion for fiscal year 2026 under the 2010 law, while around “$370 billion will be separated from other direct spending accounts for that year.”
It’s important to note that the CBO excludes significant accounts like Social Security from these cuts. Additionally, they noted that the Office of Management and Budget (OMB) estimates around $120 billion in budget resources might be available for cancellations in 2026, which is still less than the total amount needed for the cuts.
The CBO’s analysis provided a detailed breakdown of how Medicare would be impacted under these conditions. They projected that a reduction of up to 4% in Medicare spending would apply to the quarantine for several years post-2026. If OMB invokes quarantine orders totaling $415 billion between 2029 and 2030, Medicare cuts could expand to $76 billion annually by 2034, which would amount to a staggering $491 billion in total cuts from 2027 to 2034.
When viewed in the context of 2026, these anticipated reductions in Medicare spending would be well above $500 billion.
After accounting for the necessary Medicare reductions, the required cuts to other programs would likely exceed the estimated available resources each year throughout the 2027-2034 timeline, according to the CBO.
The OMB remarked, “If we quarantine funds for these programs, it will still fall short of the reductions mandated by the 2010 law.”
The CBO’s projections also indicate that Trump’s substantial tax package is expected to add nearly $3.4 trillion to the national deficit over the next decade, although this doesn’t factor in influences from macroeconomic changes or debt servicing. Meanwhile, Republicans seem to be downplaying the associated costs, asserting that the tax cuts will ultimately invigorate the economy.
