In the United States, Medicare is the single largest purchaser of medical services. This government program is primarily used by the elderly population. The future of Medicare is murky as there are many obstacles hindering its funding. It is more important than ever to ensure funding for this governmental program. The funding for Medicare has been reduced, even though the aging baby boomer generation has caused an exponential growth in enrollment.

Wealthy individuals who are in similar health conditions as those who are Medicare beneficiaries are subject to the Estate Tax. This tax is calculated based on the estate’s value before it is passed to its heirs. As more baby boomers age, there will be more deaths and more estates that are taxable. Reformation of the Estate Tax will generate more revenue and, due to its relationship with Medicare, can justifiably be used to fund Medicare.

This Note surveys the history and functionality of Medicare and the Estate Tax. This Note also analyzes the impacts of budget cuts. It suggests a congressional policy change that would allow the collected Estate Tax revenue to fund Medicare. To do so, the Estate Tax must be reformed in two steps: (1) lower the exclusion amount while raising the maximum tax rate; and (2) limit the Grantor Retained Annuity Trusts to prevent large transfers of untaxed wealth.

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