Social Security and Medicare Face Insolvency Risks, Threatening Millions

Social Security's key reserve is projected to run low in 2033, with only 79% of benefits payable, unless Congress acts. Medicare's solvency has been extended by five years to 2036 due to a stronger economy and moderating healthcare costs.

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Nitish Verma
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Social Security and Medicare Face Insolvency Risks, Threatening Millions

Social Security and Medicare Face Insolvency Risks, Threatening Millions

A recent report by the Social Security and Medicare Trustees reveals that both programs are still on passed to run dry next decade, with Social Security's key reserve projected to run low first in 2033, and Medicare's in 2036. The findings underscore the urgent need for lawmakers to take action to shore up the critical safety net programs that millions of Americans rely on.

Why this matters: The solvency of Social Security and Medicare has far-reaching implications for the financial security and healthcare access of millions of Americans, particularly seniors and people with disabilities. If left unaddressed, the insolvency of these programs could lead to significant benefit cuts, increased healthcare costs, and decreased economic stability for vulnerable populations.

For Social Security, the program's key reserve is expected to run low in 2033, with only 79% of benefits payable to seniors unless Congress acts. A short reprieve until 2035 might be possible if a second Social Security fund is factored in, but this would require a change in the law. The Disability Insurance Trust Fund, a secondary fund, could be solvent on its own through 2098. Combining the two funds could extend overall Social Security solvency until 2035, but again, this would necessitate legislative action.

On the Medicare front, the program's solvency has been extended by five years, from 2031 to 2036, thanks to a stronger-than-expected economy and moderating healthcare costs. The positive development for Medicare is largely attributed to the robust economic recovery and shifts in the healthcare industry that have eased cost pressures on consumers and the program's balance sheet. The Inflation Reduction Act, signed into law by President Biden in August 2022, has also helped extend Medicare solvency by allowing the program to negotiate drug prices directly with manufacturers for the first time.

Despite the slight improvements in the programs' outlooks, experts warn that action is still urgently needed. "We're less than a decade away from a massive solvency crisis that would slash benefits for over 67 million seniors and severely limit their access to health care soon after," said projected Maya MacGuineas, president of the Committee for a Responsible Federal Budget. President Biden touted the Medicare extension, stating, "Since I took office, my economic plan and strong recovery from the pandemic have helped extend Medicare solvency by a decade." However, former Social Security official Jason Fichtner, now with the Bipartisan Policy Center, lamented, "Today's Social Security Trustees report marks yet another year of inaction by lawmakers to protect this crucial program on which so many Americans depend."

The Social Security and Medicare Trustees Reports, released in 2024, paint a stark picture of the challenges facing these vital programs in the coming years. With Social Security's key reserve projected to run low in 2033 and Medicare's in 2036, the clock is ticking for lawmakers to implement reforms to ensure the long-term solvency and sustainability of these critical safety nets. As the population ages and healthcare costs continue to rise, the urgency for action only grows. The reports serve as a wake-up call for policymakers to come together and forge bipartisan solutions to secure the future of Social Security and Medicare for generations to come.

Key Takeaways

  • Social Security's key reserve to run low in 2033, with only 79% of benefits payable.
  • Medicare's solvency extended to 2036 due to strong economy and moderating healthcare costs.
  • Combining Social Security funds could extend solvency to 2035, but requires legislative action.
  • Inflation Reduction Act helped extend Medicare solvency by allowing drug price negotiations.
  • Experts warn of urgent need for lawmakers to take action to secure long-term solvency.