Published: Wed, June 06, 2018
Medicine | By Brett Sutton

Report warns of Medicare, Social Security financial problems

The main trust fund behind Medicare, the US health-care program for the elderly and disabled, will be exhausted in 2026, three years earlier than was projected a year ago, the government said Tuesday.

The Social Security program will pass an ugly milestone this year, as its costs exceed its income, according to its trustees.

Worse, by 2034, those reserves will be drained to the point where Social Security will have to reduce recipients' scheduled benefits. This is because premium income and general revenue income are reset each year to cover the expected rise in costs. The total annual cost of the OASDI program is projected to exceed total annual income in 2018 for the first time since 1982 and to remain higher throughout the 75-year projection period.

In 2017, Medicare covered 58.4 million people, with 49.5 million older than 65.

Medicare's hospital insurance fund, meanwhile, will become insolvent by 2026, or three years sooner than projected last year. Financed with payroll taxes collected from workers and employers, Social Security and Medicare account for about 40 percent of government spending, excluding interest on the federal debt.

"The administration's economic agenda - tax cuts, regulatory reform and improved trade agreements - will generate the long-term growth needed to help secure these programs", Treasury Secretary Steven Mnuchin said Tuesday. Options include raising the maximum income cutoff for imposing Social Security taxes, now $127,200.

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".

House Speaker Paul Ryan, R-Wis., has always been an advocate for overhauling the programs, introducing a voucher-like system for Medicare and calling for partially privatizing Social Security. It's not just the growing number of beneficiaries as the baby boom generation continues moving into retirement.

In principle, the supposed to be paying forward its Social Security and Medicare obligations by building up trust funds to cover future costs.

Democrats want to expand the safety net by spending more on health care and education.

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