Five Key Facts About Social Security and Medicare
Millions of Americans rely on Social Security and Medicare benefits they receive from the federal government. Social Security funds go to people who have retired or are disabled, as well as the survivors of workers who have died and dependents of beneficiaries. Medicare provides health insurance to people who are 65 or older, certain young people with disabilities, or people with end-stage renal disease.
However, operating these programs is exorbitantly expensive, and neither program has its own fiscal safety net. A recent report from the Social Security and Medicare Board of Trustees shows that both programs need more stable funding streams to keep operating at current levels.
Here are five facts on the Board of Trustees’ report and the future of Social Security and Medicare.
1. According to the Social Security and Medicare Board of Trustees, both programs face long-term financing shortfalls. Projections show that, in less than two decades, Social Security will have to cut benefits by 21 percent if corrective action is not taken.
2. Current projections show that Social Security trust fund reserves will be depleted in 2034. This depletion will be a result of baby boomers aging and our lower national birth rate, which means fewer payers into the system. We are already witnessing changes to its balance sheet: for the first time since 1982, Social Security’s total cost is projected to exceed its total income this year. The report details that costs will be financed with a combination of non-interest income, interest income, and net redemptions of trust fund asset reserves from the Treasury’s General Fund until funds run out entirely.
3. Last fiscal year, Social Security and Medicare together accounted for 42 percent of federal program expenditures. According to Washington Post economics columnist Robert Samuelson, had Medicaid also been included in this calculation, this figure would have been over 50 percent. To put this in context, the country spends 2 percent of total spending on education and 3 percent on food and agriculture.
4. The report also highlights that Medicare will experience significant cost increases in excess of the GDP through the mid-2030s. For the past decade, national health expenditure growth has outpaced economic growth. And according to the Urban Institute, Medicare spending will continue to grow at 4.9 percent through 2028.
5. The Social Security and Medicare Board of Trustees have called on lawmakers to address these challenges as soon as possible. If changes are made sooner, the Board writes, the public will have more time to prepare and adverse impacts on some of our most vulnerable populations (low-income workers and people already dependent on the program) will be minimized.
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