The Medicare trust fund will be exhausted in 2036, and the combined Social Security trust fund will become exhausted in 2035, the programs’ trustees projected on Monday.
The report illustrates the long-term problems facing the entitlement programs, on which tens of millions of people rely. Nevertheless, it contained good news in that the deadlines have been moved back a bit from last year’s projections.
The extended timeline gives a bit more breathing room to Congress, where the looming depletion of the trust fund has become a top political issue. Both President Joe Biden and former President Donald Trump have vowed to not to cut the popular entitlement benefits for seniors.
Still, the fact that the dates are still just over a decade away is another reminder of the fiscal cliffs that are looming large and the need for lawmakers to craft a plan to keep the programs solvent.
“The Biden-Harris administration has promised to build an economy from the middle out and the bottom up—that includes ensuring that workers and their families can count on the Social Security and Medicare benefits they have earned throughout their lives,” said Acting Secretary of Labor Julie Su.
Medicare
Medicare is the government health insurance plan primarily covering people aged 65 or older. It was first implemented in 1965 and has been a popular entitlement program for older people and retirees.
The new projections show that the expected date of exhaustion of the Medicare trust fund has been pushed back from 2031 to 2036. At that point, the Medicare fund’s reserves will become depleted and the continuing program income will be enough to pay just 89% of total scheduled benefits.
The improvement from last year’s trustee projections is due to several factors, according to the report, including higher payroll tax income because of the stronger-than-expected economy and because actual 2023 expenditures were lower than expected last year. Plus, the trustees cited “a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates starting in 2024.”
Social Security and Disability Insurance trust funds
The exhaustion date for the trust fund for the combined Social Security retirement and disability funds has been pushed back by a year.
Social Security is a popular retirement program that can first start to be claimed at age 62, although benefits increase the longer one waits to claim them, with benefits capping out at a retirement age of 70.
Likewise, the trustees predict that the combined Social Security trust fund and Disability Insurance trust fund will only be enough to pay 83% of scheduled benefits sometime in 2035.
Social Security’s looming insolvency is driven, in part, by declining birthrates. While life expectancy has increased since Social Security’s creation in the New Deal era, the ratio of workers to beneficiaries has declined, further putting pressure on the system.
What is being done?
Although outside analysts have long warned that Congress should act to shore up the programs’ finances, there has been little major progress on a plan to fix the trust funds.
The looming deadlines are yet another reminder for lawmakers that the prized entitlement programs can’t last in perpetuity without action being taken to maintain their solvency.
During a call with reporters on Monday, senior administration officials pointed out that Biden’s budget proposal included a commitment to protect Social Security and work with Congress to strengthen the programs. Biden’s budget includes increasing payroll taxes for the wealthy in order to keep Social Security solvent — although such a move would face opposition from Republicans opposes to more tax increases.
“Seniors spent a lifetime working to earn the benefits they receive, and the Biden-Harris Administration will continue to oppose cuts to either program,” said Treasury Secretary Janet Yellen. “We are committed to steps that would protect and strengthen these programs that Americans rely on for a secure retirement.”
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House Speaker Mike Johnson (R-LA) has backed the idea of a bipartisan fiscal commission to address the government’s broader debt problems.
In January, the House Budget Committee voted to advance bipartisan legislation that would form a panel consisting of both Republican and Democratic lawmakers from both chambers of Congress, in addition to outside experts. The committee would work to produce a report and propose legislation that would stabilize the ratio of public debt to GDP to at or below 100% within 10 years.