Of the two pillars of the U.S. social safety net, Social Security has overtaken Medicare as the most pressing bankruptcy risk, according to a new government report. But both programs are on track to dry up over the next decade.
But the 2024 Social Security and Medicare Board of Governors Report delivered a jolt of good news for Social Security and good news for Medicare.
Social Security's main reserves are projected to be depleted first in just nine years. Unless lawmakers act, the program could pay only 79% of benefits to seniors by 2033, the same annual deadline as last year's estimate.
A short reprieve until 2035 may be possible if a second social security fund is taken into account, but that would require changes to the law. Last year's report predicted that virtual integration funding would run out a little earlier, in 2034.
Meanwhile, the news on Medicare was surprisingly positive. A stronger-than-expected economy and lower health care costs could keep the program in place until 2036.
This is an increase of five years from last year's current estimate of the program. Just two years ago, there were concerns that he would run out of this program as early as 2028.
Maya McGuineas, chair of the Committee for a Responsible Federal Budget, summed it up this way: After “we are less than a decade away from a major insolvency crisis that will cut benefits for more than 67 million seniors and severely limit access to health care in the near term.” “
The annual report from the program's trustees, Treasury Secretary Janet Yellen, Health and Human Services Secretary Xavier Becerra, Acting Labor Secretary Julie Su, and Social Security Commissioner Martin O'Malley, also tells members on Capitol Hill: It called for steps to be taken to strengthen both insolvency and insolvency programs. Benefit cuts are likely to continue.
Commissioner O'Malley said action is needed to provide relief to the approximately 70 million Social Security recipients and the more than 180 million workers and their families who contribute to the Social Security program through payroll taxes. added.
What was the cause of the change in estimates?
The good news for the Medicare program is largely due to a strong economy and changes in the health care industry, which are expected to reduce some costs and ease some pressure on consumers and Medicare balance sheets in the coming years. is.
On Monday, Biden aides focused on the good news about the program and the president's actions in recent years that they say have helped expand the program's solvency.
A big help, the report said, is the strengthening of the balance sheet of Medicare Advantage, which provides insurance through private health insurers.
New rules on prescription drug prices also helped.
The Inflation Control Act, signed into law by Biden in August 2022, made a series of reforms to Medicare. Most notably, for the first time, the program can now negotiate directly with drug companies to lower the prices of some prescription drugs.
The report says these cost savings will begin to be realized in the coming years, contributing to a strengthened outlook.
“Since taking office, my economic plan and strong recovery from the pandemic have helped extend Medicare solvency by 10 years,” President Biden said in a statement.
The less dramatic positive developments on Social Security are thanks to improvements in the program's Disability Insurance Trust Fund, which the report says will increase labor productivity and economy-wide estimates for the coming years. This is said to have been driven by the rise in disability rates and expected declines in disability rates. This secondary fund may be paid separately until 2098.
But when combined with the main Social Security fund, the Old Age and Survivors Insurance (OASI) Trust Fund, it could extend Social Security's overall solvency until 2035.
Combining the two funds would require legislative changes, but Commissioner O'Malley on Monday focused on 2035 as a key deadline.
“This year's report is an indicator of good news,” he said in a statement, promising that “any potential benefit reduction event will be postponed from 2034 to 2035.”
Will lawmakers act?
Monday's report highlighted that both Social Security and Medicare face long-term shortfalls. And the issue was only discussed sporadically in the Diet and on the campaign trail last year.
On Capitol Hill, a flurry of efforts to reform Social Security in the spring of 2023 quickly stalled, and by last summer bipartisan talks were underway to find a solution on ice until at least after the 2024 election. camp agrees.
“Today's Social Security Board report marks another year of inaction by lawmakers to protect this critical program that so many Americans depend on,” said former Social Security official. says Jason Fichtner, now of the Bipartisan Policy Center.
“Influential voices on both sides of the aisle are burying their heads in the sand,” he added.
Similarly, potential presidential candidates from both parties are giving little thought to their concrete plans if they win in November.
President Biden recently announced a budget that calls for tax increases on the wealthiest Americans to shore up Social Security, while President Donald Trump recently hinted at possible “cuts” in rights if elected in an interview on CNBC. Published a document.
Bipartisan experts stress that a bipartisan Social Security deal to expand solvency would almost certainly require both tax increases and benefit cuts.
The problem at the moment is that any tax increases are anathema to Republicans, while benefit cuts, even raising the retirement age, are now summarily rejected by Democrats.
This post has been updated.
Ben Werschkul is Yahoo Finance's Washington correspondent.
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