Medicare and Social Security Go-Broke Dates Pushed Back
ABC News broadcast the “go-broke” dates have been pushed back for benefit programs Medicare and Social Security. The improving economy has contributed to change the projected depletion dates, according to the annual Social Security and Medicare trustees report.
Medicare is the federal government’s health insurance program that covers people aged 65 and older and those with severe disabilities or illnesses. It insures more than 66 million Americans last year, with most being 65 and older.
In case the programs become incapable of paying full benefits to Americans that are retiring, policy changes are still required. Trustees project that the reserves of the combined Social Security trust funds will be depleted in 2035. Medicare’s Hospital Insurance (HI) trust fund will run out in 2036, which was pushed back five years later than in last year’s report. The reasoning is in part due to higher payroll tax income and lower-than-projected expenses from last year.
President Joe Biden responded to the report by saying that “as long as I am president, I will keep strengthening Social Security and Medicare,” adding that he wants high-income taxpayers “to pay their fair share” to bolster funding for the benefit programs.
Benefits wouldn’t necessarily stop altogether, but trust fund weakening would trigger large across-the-board cuts. Medicare will only be able to cover 89% of costs for patients’ hospital visits, hospice care and nursing home stays or home health care that follow hospital visits, if and when the program fund’s reserves become exhausted. Social Security could still initially pay about 83 percent of scheduled benefits using its annual tax income (see figure provided by the Center on Budget and Policy Priorities).
The aging population is driving costs and spending for Medicare and Social Security because this is the main source of income, and health coverage for most beneficiaries and are not overly generous, policymakers will need to increase revenues to advance the programs’ fiscal outlook and protect beneficiaries. However, they should not be driven to make harmful benefit cuts — such as raising the ages of eligibility — based on misleading claims that such actions are necessary to boost their financing. Thorough revenue options and reductions in Medicare payments to providers are available.
President Biden’s 2025 budget contains Medicare proposals to permanently close the projected deficit in the HI trust fund, decrease the risk of across-the-board cuts, and simultaneously reduce federal deficits and debt. The budget would close a gap allowing some business income to escape both the HI payroll tax and the net investment income tax (NIIT), for households with over $400,000 in income. It would elevate the HI payroll tax and NIIT rates from 3.8 percent to 5.0 percent, committing the proceeds of the NIIT to the HI trust fund. Further, this reduces Medicare prescription drug prices and credit the savings to HI.
Although, the President’s budget does not outline a specific plan for strengthening Social Security, it does include the need to raise revenues and prevent benefit cuts as one of its several principles.
Social Security and Medicare Political Presidential Debates
Democratic President Joe Biden and Republican former President Donald Trump are both campaigning hard for reelection this year. Have no doubt that the future of Social Security and Medicare is top of mind as a political talking point for these candidates.
Biden holds strong in his stance to refuse any Republican-led efforts to cut Medicare or Social Security benefits to brace for the shortfall saying in a statement by the White House, “since I took office, my economic plan and strong recovery from the pandemic have helped extend Medicare solvency by a decade, with today’s report showing a full five years of additional solvency.” He continued, “my plan would extend Medicare solvency permanently by asking the wealthy to pay their fair share and lowering prescription drug costs.” To shore up Medicare he’s pitched raising taxes on people making $400,000 or more a year. However, Biden has not offered up a plan for Social Security.
The White House report goes on to say that Republicans in Congress, on the other hand, have a very different vision. Their budget sides with the wealthy and special interests in order to cut Social Security by over $1.5 trillion, increase the retirement age, raise prescription drug costs, and transition Medicare to a system that would raise premiums for many seniors.
In an interview with CNBC in March, the former President indicated he would be open to cuts to Social Security and Medicare. Trump saying, “there is a lot you can do in terms of entitlements, in terms of cutting.”
Others have chimed in on the actions Congress needs to be proactively undertaking. President, Nancy Altman of Social Security Works, an advocacy group for the social insurance program, said the report shows that “Congress should take action sooner rather than later to ensure that Social Security can pay full benefits for generations to come.”
AARP CEO Jo Ann Jenkins said “the stakes are simply too high to do nothing.”
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said “the longer Congress delays reform, the more challenging the options become, and these programs are too important to continue to let them drift toward insolvency. There are many solutions available to strengthen Social Security and Medicare, and it’s critical that Congress provide greater certainty and stability for the future.”
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