Federal officials issued a warning about the fiscal health of the Medicare and Social Security programs on Monday, cautioning that beneficiaries are set to face major shortfalls within about 15 years.
The Social Security and Medicare trustees projected that the combined Social Security trust fund will be depleted in 2035. At that point, enrollees would face a roughly 25% cut in benefits.
Social Security costs will likely exceed total revenue in 2020 for the first time since 1982, the trustees said.
That spend rate is primarily driven by payments to retirees. The trustees expect that the trust fund for Social Security disability insurance, on the other hand, will now extend further than expected last year, to 2052. The improvement is attributable to more people working than was true in past years when disability rates rose, as well as a higher mortality rate.
“Clearly the unemployment rate plays a role,” said a senior official who briefed reporters on the report Monday morning.
The part of Medicare that pays for in-patient hospital and hospice care will run out of full funding in 2026, according to Monday’s trustees report. At that point, the program would pay a diminishing amount of reimbursement for medical costs. Medicare Parts B and D, which primarily assist with outpatient care and prescription drug access, are expected to be well funded for the foreseeable future.
But Medicare cost is expected to rise steadily as share of GDP from 3.7% in 2018 to 6% of GDP in 2043.
“Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the trustees say in their report.
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare,” write the trustees, who are all Trump appointees, including the secretaries of Treasury, Labor, and Health and Human Services. “Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
While projections in the near-term are more certain, the trustees caution that their longer-term projections will be affected by a variety of factors, including efforts to cut costs and advancements in medical technology.
