June 19, 2018

Medicare and Social Security Finances Worsened Last Year

06 June 2018, 10:41 | Winifred Adams

Medicare and Social Security are running out of money more quickly than expected, officials said Tuesday.

Medicare's hospital insurance fund, meanwhile, will become insolvent by 2026, or three years sooner than projected last year.

The report also noted social security will have to reach into its reserves this year.

While costs have exceeded net income since 2010, this is the first time in more than three decades that spending is expected to outweigh total income, by about $2 billion, meaning asset reserves will decline.

Nancy Berryhill, the acting commissioner of the Social Security Administration, acknowledged that while the projected depletion date of the combined Social Security Trust Funds has not changed, "The fact remains that Congress can keep Social Security strong by taking action to ensure the future of the program".

The now closer to the insolvency of the Social Security than to the attacks of September 11. For Medicare, it could mean that hospitals, nursing homes and other providers of medical care would be paid only part of their agreed-upon fees. It's also the unpredictability of health care costs, which can be jolted by high-priced breakthrough cures, and which regularly outpace the overall rate of economic growth. But when interest income is excluded from the equation, program costs exceed income throughout the 75-year projection period. Options include raising the maximum income cutoff for imposing Social Security taxes, now $127,200.

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The four top officials serve as the Social Security and Medicare trustees, along with two independent trustees who are supposed to represent the public.

But speaking to reporters on Tuesday, Treasury officials said the cuts were set to decrease revenues for both programs.

Rather than cutting benefits, the Democratic-leaning Social Security Works coalition supports expanding benefits as a solution to the nation's looming retirement crisis by asking the wealthy to contribute more.

Higher deficits mean less maneuvering room for policymakers when the day of reckoning finally arrives for Social Security and Medicare.

Medicare Part A's trust fund is funded through payroll taxes, split between employer and employee. But when the money is actually needed to pay for benefits, economists say a government deep in debt could be hard pressed to make good.

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