Sunday, 16 June, 2019

Medicare, Social Security running out of money faster than expected

Social Security now running a deficit; Medicare to hit insolvency three years earlier than projected Social Security to tap reserves to cover 2018 benefits
Gustavo Carr | 10 June, 2018, 08:28

The U.S. government's healthcare program for the elderly will exhaust its reserves for hospital insurance in 2026, three years earlier than last year's forecast, the Social Security and Medicare Boards of Trustees said in a report on Tuesday.

Medicare's Board of Trustees blamed the earlier depletion forecast on expectations of lower payroll taxes and less revenue from taxing Social Security benefits, both the result of the tax overhaul signed by President Donald Trump past year, according to a senior administration official.

A companion report by Social Security trustees estimated that the combined trust funds for Social Security, which fund old-age benefits and disability insurance programs, will be depleted by 2034.

For Social Security, the last time the program ran an annual deficit was in 1982, before President Reagan signed changes that set it on firmer footing for the next 30 years.

At that time, there will be sufficient income coming in to pay 79% of scheduled benefits - a figure that's slightly higher than the 77% projected in last year's report.

Of the two programs, Medicare faces the greatest fiscal challenges as medical costs increase and the U.S. ages, with many baby boomers set to retire in the next several years.

Medicare Part B, and D will remain adequately funded "into the indefinite future", the trustees reported, because law provides financing from general revenues and beneficiary premiums each year to meet the next year's expected costs.

The White House claims the long-running economic boom will help secure Medicare and Social Security's future.

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The Social Security trust funds for benefits for the elderly and disability insurance could be depleted by 2034, the same as last year's projection.

"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 and lead them to a more stable path", Mnuchin said in a statement on Tuesday.

A major reason for Social Security's long-term financial problems is a decline in the number of workers for each beneficiary.

In 1960, there were about five workers for every Social Security beneficiary.

The aging of the population is another factor in the growth of the two entitlement programs.

Two other Medicare funds - Part B, which covers doctor and outpatient visits and Part D, which covers prescription drugs - are reset each year based on projected costs. It has added 7 million people since 2013. Medicare recipients' monthly premiums change annually based on these costs.

Total Medicare costs will grow from approximately 3.7% of GDP in 2017 to 5.8% of GDP by 2038.

Information for this article was contributed by Robert Pear of The New York Times, and by Ricardo Alonso-Zaldivar and Andrew Taylor of The Associated Press.