The Trustees of the Social Security and Medicare trust funds recently released their annual report. It received scant attention because who in Washington wants to be the bearer of bad news?
And the news is bad. Social Security and Medicare are both in deep financial trouble, and they are heading toward shortfalls within a few years.
The report concludes that Social Security will be able to pay retirement and survivor benefits on a timely basis until 2033. “At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.”
That means benefits will be cut by one-quarter unless Congress acts to raise the retirement age, increase payroll taxes or find some other source of revenue.
The Hospital Trust Fund, or Medicare Part A, which pays for hospital care, is only financially solvent for five more years. By 2026, “the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 91 percent of total scheduled benefits.”
The easiest way out for Congress on this problem is to lower the reimbursement payment to hospitals. That will put an even greater strain on hospitals and shift more costs to patients with private insurance.
As usual, the Trustees conclude with a mild rebuke. “Lawmakers should address these financial challenges as soon as possible,” the report reads. “Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
But only cricket sounds are coming out of Washington, because these are difficult decisions that may well be unpopular with the public. Interestingly, what Congress is talking about is dramatically expanding the social safety net.
The $3.5 trillion budget package of so-called human infrastructure proposed by Democrats includes, among other things, lowering the Medicare eligibility age from 65 to 60 while adding vision, dental and hearing benefits, a national childcare program, federal support for elder care, universal pre-K, and free community college.
New taxes are supposed to pay for these programs, but as we see with Social Security and Medicare, entitlement programs continually increase in cost, outstripping the ability to pay for them. Funding for Social Security and Medicare comes directly out of the paychecks of employees and the payroll of employers, and they are still running out of money.
As the saying goes, when you find yourself in a hole, stop digging. Instead of creating new entitlements, Congress should be figuring out how to pay for the ones we have now.