Medicare Funding To Run Out 3 Years Earlier

Social Security must reduce benefits in 2034 if reforms aren’t made

Social Security must reduce benefits in 2034 if reforms aren’t made

By 2026, Medicare's Hospital Insurance Trust Fund will pay 91% of costs, and drop to 78% by 2039, according to a report released Tuesday by trustees for Medicare and Social Security.

"The HI trust fund does not meet either the trustees' test of short-range financial adequacy or their test of long-range close actuarial balance", the report stated.

The projections are the first from the administration since Trump signed a $1.5 trillion tax cut into law in December.

Treasury Secretary Steven Mnuchin said in a statement that there's time to fix the problems. "The programs remain secure", Mnuchin said. However, certain long-term issues persist.

The good news is, Social Security isn't projected to run short of funds any sooner than it was a year ago.

Social Security's total cost is projected, for the first time since 1982, to exceed its total income including both tax receipts and interest in 2018 and to remain higher throughout the projection period, the report said. Medicare Part B, which covers outpatient visits, and Part D, which pays for most prescription drugs, are paid for in part by general revenue and by individuals' premiums.

Medicare costs will rise from last year's 3.7 percent of GDP to 5.8 percent by 2038.

Last year, Medicare covered more than 58 million people, about 50 million of whom were 65 or older, and almost 9 million were disabled.

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"Our estimate could change, because we still have several months of CPI data to go before the COLA is announced in October", Mary Johnson, The Senior Citizens League's Social Security policy analyst, said in a statement.

But demands on both programs are increasing as America ages. Some 45 million retirees and six million dependents receive Social Security benefits. It will decline further to about 2.2 by 2035, when most baby boomers will have retired, officials said. 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. None of those top officials was present Tuesday; an aide cited scheduling conflicts.

The National Committee to Preserve Social Security and Medicare advocacy group responded to the report by urging the Trump administration to allow the program to negotiate prices with drugmakers. The public trustee posts are now unfilled.

Instead they'll just have to learn to get by on about three-quarters of the benefits.

Democrats, meanwhile, want to extend the social safety net by spending more on health care and education.

Higher deficits would leave less maneuvering room for policymakers when the day of reckoning finally arrives for Social Security and Medicare. That means it now must start drawing down principal in the trust fund to continue paying promised benefits in full. But now that Ryan is leaving Congress, it's unclear who will take up the mantle for budget hawks.

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. Their formula is likely to involve tax increases to help keep the programs solvent.

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