The go-broke dates for Medicare and Social Security ‘s trust funds have moved up as rising health care costs and new legislation affecting Social Security benefits have contributed to earlier projected depletion dates, according to an annual report released Wednesday.
The go-broke date — or the date at which the programs will no longer have enough funds to pay full benefits — was pushed up to 2033 for Medicare’s hospital insurance trust fund, according to the new report from the programs’ trustees. Last year’s report put the go-broke date at 2036.
Meanwhile, Social Security’s trust funds — which cover old age and disability recipients — will be unable to pay full benefits beginning in 2034, instead of last year’s estimate of 2035. After that point, Social Security would only be able to pay 81% of benefits.
The trustees say the latest findings show the urgency of needed changes to the programs, which have faced dire financial projections for decades. But making changes to the programs has long been politically unpopular, and lawmakers have repeatedly kicked Social Security and Medicare’s troubling math to the next generation.
President Donald Trump and other Republicans have vowed not to make any cuts to Medicare or Social Security, even as they seek to shrink the federal government’s expenditures.
Social Security Administration Commissioner Frank Bisignano, sworn into his role in May, said in a statement that “the financial status of the trust funds remains a top priority for the Trump Administration.” A common misconception is that Social Security would be completely unable to pay benefits once it reaches its go-broke date.
“Current-law projections indicate that Medicare still faces a substantial financial shortfall that needs to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers,” the trustees state in the report.
The trustees are made up of six people — the Treasury Secretary serves as managing trustee, alongside the secretaries of Labor, Health and Human Services, and the commissioner of Social Security. Two other presidentially-appointed and Senate-confirmed trustees serve as public representatives, however those roles have been vacant since July 2015.
About 68 million people are enrolled in Medicare, the federal government’s health insurance that covers those 65 and older, as well as people with severe disabilities or illnesses.
Wednesday’s report shows a worsening situation for the Medicare hospital insurance trust fund compared to last year. But the forecasted go-broke date of 2033 is still later than the dates of 2031, 2028 and 2026 predicted just a few years ago.
Once the fund’s reserves become depleted, Medicare would be able to cover only 89% of costs for patients’ hospital visits, hospice care and nursing home stays or home health care that follow hospital visits.
The report said expenses last year for Medicare’s hospital insurance trust fund came in higher than expected.
Income exceeded expenditures by nearly $29 billion last year for the hospital insurance trust fund, the report stated. Trustees expect that surplus to continue through 2027. Deficits then will follow until the fund becomes depleted in 2033.
A payroll tax on covered earnings provides the main funding for the hospital insurance trust fund. Future expenses paid by the fund are expected to increase at a faster pace than earnings.
Legislation is needed to change those tax rates.
The report states that the Social Security Social Security Fairness Act, enacted in January, which repealed the Windfall Elimination and Government Pension Offset provisions of the Social Security Act and increased Social Security benefit levels for some workers, had an impact on the depletion date of SSA’s trust funds.
Romina Boccia, a director of Budget and Entitlement Policy at the libertarian CATO Institute called the repeal of the provisions “a political giveaway masquerading as reform. Instead of tackling Social Security’s structural imbalances, Congress chose to increase benefits for a vocal minority—accelerating trust fund insolvency.”
“It’s a clear sign that populist pressure now outweighs fiscal responsibility and economic sanity on both sides of the aisle,” She said. “Pair that with a Republican reconciliation bill that increases tax giveaways while refusing to rein in even the most dubious Medicaid expansions, and the message is unmistakable: Washington is still in giveaway mode.”
AARP CEO Myechia Minter-Jordan said “Congress must act to protect and strengthen the Social Security that Americans have earned and paid into throughout their working lives.” “More than 69 million Americans rely on Social Security today and as America’s population ages, the stability of this vital program only becomes more important.”
Social Security benefits were last reformed roughly 40 years ago, when the federal government raised the eligibility age for the program from 65 to 67. The eligibility age has never changed for Medicare, with people eligible for the medical coverage when they turn 65.
Nancy Altman, president of Social Security Works, an advocacy group for the popular public benefit program said in a statement that “there are two options for action: Bringing more money into Social Security, or reducing benefits. Any politician who doesn’t support increasing Social Security’s revenue is, by default, supporting benefit cuts.”
Congressional Budget Office reporting has stated that the biggest drivers of debt rising in relation to GDP are increasing interest costs and spending for Medicare and Social Security. An aging population drives those numbers.
Several legislative proposals have been put forward to address Social Security’s impending insolvency.
